The use of
financial statement in any business organization cannot be over emphasized,
financial statements are needed by variety of people for different purposes.
the government needs the financial books (reports) of a company for taxation
purposes, the investors want to know how profitable a company is and will be
able if the management of the company will like to know the level of their
performance, all these cannot be known without the analysis of financial
statement of the company or companies involved.
work therefore forecast on the usefulness of financial statements in assessing the
performance of companies and guiding investment decisions, in order to provide
investors, management, government and others what the company is worth.
sources of data which are, primary and secondary data which led to the
discussion of findings, conclusions and recommendation of the research topic.
Table of contents
List of tables/charts
CHAPTER ONE: INTRODUCTION
Background of the study
Statement of the problem
Objectives of the study
Significance of the study
Scope and limitation of the study
CHAPTER TWO: REVIEW OF RELATED LITERATURE
Points of sales
Development of generally accepted accounting principles
Profile of the company
Analysis of trading accounts of marketing department of
Analysis of profit and loss account of the company
The fund flow statement
Profit and Loss Appropriation Account
Interpretation of Final Accounts of the company.
Evaluation of items with ratios.
Auditors report and information.
CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY
Sources of Data
Method of Investigation
Statistical method used for data analysis.
Presentation, Analysis and Interpretation of data
CHAPTER FIVE: FINDINGS, CONCLUSION AND RECOMMENDATION
Discussion of findings
Appendix A: Questionnaire
OF THE STUDY:
A company’s financial statements are analyzed internally by management
and externally by investors and creditors.
Management analysis of financial statements primarily relates to parts of
the company which enables management to plan, evaluate, and control operation
within the company. Investors and
creditors generally focus their analysis of financial statements on the company
as a whole, which helps them decide whether to invest in or extend credit to
As a minimum, financial statement will include a statement of source and
application of funds. Having been able
to obtain a fair knowledge of the legal aspects of preparing financial
statements and having worked examples through basic financial statements of a
company, it is reasonable to begin to think of the significance of the futures
His is because except the figure in financial statements will not in
itself serve any purpose, the figures in the financial statements are
How well or badly the company is performing.
How financially strong or otherwise the company is.
How valuable or otherwise the company is in terms of
its assets base.
Unless a means
is available for being able to obtain the information specified above a
financial statement would just be of no substance and use.
In order therefore to interpret financial statements for the proper
information of users, there is the need to proper ratio analysis and when to
present to management, a number of issues must be considered.
Profitability of the business, operations, particularly
in relation to capital employed.
Solvency of the firm:
The ability of the business to pay its creditors the adequacy of its
working capital and the liquidity of its current assets viewed side by side
with the current liabilities.
The business trend:
An analysis of the pattern of business overtime to determine whether
profits are rising or falling and the implications for future performance.
The gearing and cover:
Assessing the adequacy of profits to meet interest payments, pay
dividends to shareholders’ investment.
STATEMENT OF THE PROBLEM:
This research work intends to look into the extent to which investors do
carry out and rely on the results of financial statements analysis before
making their investment decisions, and the employment by companies of financial
statement analysis in assessing their performance and that of their respective
OBJECTIVES OF THE STUDY:
The objectives of this study are as follows:
Financial statement analysis consists of applying
analytical tools and techniques to financial statements and other relevant data
to obtain useful information.
This information is shown as significant relationships
between data and trends in those data that assess the company’s past
performance and current financial position.
The information shows the results or consequences of
prior management decisions.
In addition, the information is used to make
predictions that may have a direct effect on decisions made by users of
Present company investors and potential company
investors are interested in the future ability of a company to earn profits –
SIGNIFICANCE OF THE STUDY:
This work would be of immense benefit to the following groups:
Economic researchers and students.
Investors and shareholders
contribution of this work are:
To the management of companies as a tool for evaluating
their performance and knowing whether they really take not of financial
to further examination of the use of financial
to other researchers or research scholars who may wish
to carry out further research on the subject matter or other related topics.
it will provide insight on how business organization
rely on financial statement for decision making.
SCOPE AND LIMITATION OF THE STUDY:
This study is restricted to only the analysis of the financial statements
of manufacturing, trading and profit making organizations. The researcher would have liked to give the
work a wide coverage if not for some constraints imposed on hereby time and
access to finance.
The following research questions will be used to get information for the
purpose of evaluating the usefulness of financial statements in assessing the
performance of companies an in guiding investment decisions especially as it
affects Onitsha Aluminium company in particular.
Do you have any sales and purchases?
Are expenses authorized or approved before they are
Any profit and loss account?
In what ways do accounting techniques help business
organization in determining their financial position?
how can financial statements be used in assessing the
performance of companies for efficient investment/management decisions?
Can firms or companies do without financial statements
in their investment decisions?
STATEMENT OF HYPOTHESIS:
Hypothesis testing will involve the use of null hypothesis (Ho), the
study is seeking to reject. It’s
rejection will lead to the acceptance of the alternative hypothesis (H1).
Ho: Financial Statements do not help in
guiding investment decisions.
H1: Financial statements help in guiding
statements are irrelevant in assessing the performance of Onitsha Aluminium
statements are very relevant in assessing the performance of Onitsha Aluminium
DEFINITION OF TERMS:
These are used to convey a concise picture of the results of operations
and the financial position of a business in a given accounting period usually
12 months that is a year.
PERFORMANCE: Consisting of a comparison of actual
outcomes (actual costs and revenues) and planned outcomes (budgeted costs and
revenues) at a regular intervals usually a 12-month that is a year.
COMPANY: Is a
separate and distinct entity from its members (shareholders) with a corporate
name in which it can sue and be sued, own property and enjoy contractual
Is regarded as the commitment of current funds in anticipation of
receiving a larger future flow of funds OR is ploughing one’s funds into
projects or assets with a view to increasing one’s wealth.
DECISION: Is the
selection or choosing among the alternative courses of action that will enable
the objective to be achieved OR as making choices between future, uncertain
something which can be used for some practical purpose, serviceable, helpful or
worth keeping. OR is any information
kept in an organization which serve for future purpose(s) and assist in
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