Role of Financial Statement in Investment Decision Making. (A Case Study of United Bank of Africa PLC)
OBJECTIVE OF THE STUDY
The general objective is to ascertain the role of financial statements in investment decision-making.
The specific objective is as follows:
- To determine how a set of analytical tools will aid prospective investors in assessing the financial position of the corporate organization.
- To evaluate the performance of a company for investment decision-making.
- To determine the profitability of a company.
- To appraise the fundamental use of financial statement information, this is to provide information for investment decision-making.
REVIEW OF RELATED LITERATURE
The basis of financial planning analysis and decision making is the financial information. Financial information is needed to predict, compare and evaluate a firm’s earning ability. It is also required to aid in economic decision making investment and financing decision making. The financial information of an enterprise is contained in the financial statements.
Lasher (2009) financial statement (5th edition) studied the role offinancial reporting on investment on financial institution. It made use of the economic analysis and regression method to analyze secondary data and arrived at the conclusion that financial statement is the communication of financial information useful for making investment credit and other business decisions. This chapter therefore seeks to show the views relating to the impact of financial statements on investment decisions in an organization. A business financial health is reported in three financial statements. The statement of financial statement, which shows a record of the business assets and liabilities at a point in time. The income statement or the profit and loss statement shows a record of its income and expenses for a given period. The cash flow statement describes the effect of its operations on the cash balances. Each of this required to make informed business investment decisions.
Lynch (2013) is credited with using the phrase quoted, the person that turns over the most rocks wins the game. And they have always been my philosophy. Let us see turning most rocks as spotting new opportunities 27 and gaps, therefore when investors make good use of an organizations’ report that is spotting opportunities in making investment decision the chances of growing big, avoiding losses and getting rid of risk is ignored totally and as such growing in profitability and winning the “game”.
This deals exclusively with the methods, procedures, and systems which the researcher employed in the collection of the necessary data and88 information for the research work. Every stage of research process focuses on some kind of sampling. This is so because it becomes apparently impossible to include the entire variables, which might provide useful information or to use all the data gathered in the final report.
This study was basically a survey research and therefore required the use of survey method of investigation. In this survey research, a questionnaire is designed to gather information relevant to this project topic. The questionnaire has option Yes and No, and Annual Report
POPULATION OF THE STUDY
A population is made up of specific conceivable traits elements, people subjects or observation, which relate to the situation of interest in the study. According to Anyanwu (2000), population is the aggregation of the elements from which the sample of the population is seen as a group of subject units from which the study will make some data collection.
DATA PRESENTATION AND ANALYSIS
In this chapter, we are concerned with analysis of the answers to the questions in the questionnaires administered to the respondents, the use of table will be used or adopted to clearly show the responses obtained in95 each question of the questionnaires and the research hypothesis from chapter one will be used to test hypothesis guiding the study through the use of percentages and chi-square (X 2 ) techniques.
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
This research centers on the role of financial statement in investment decision making in United bank of Africa.
This section summarized the various findings generated from the research study; it comprises the summary of the findings, conclusion and recommendations.
SUMMARY OF FINDINGS
This study set out to study the role of financial statement in investment decision making. (A case study of United Bank Of Africa plc.).
From the test of hypotheses, we discovered the following;
- Financial statement is used to be relied upon in investment decision making.
- Financial statements are useful for forecasting company’s performance.
- There is a positive and significant relationship between financial statement and investment decision making.
- Financial statements provide various facts of a business such as, accurate records of its income and expenses and also its assets and liabilities.
- Finally, the basic aim of this study is to determine the role of financial statement in investment decision making. This is because prospective investor’s uses financial statement of concerns as a major parameter for assessing the profitability and the risk of investing in such ventures andthe aim of financial statement is to provide financial information about an entity to interested parties.
The information can become meaningful through financial interpretations and decisions unveil the essence of financial statement as the major custodian of financial information necessary for any investment decision. Investment are not made on a vacuum hence, there are bedrocks on which they will stand.
This study used a representative sample that took into account gender, age, education and occupational balances. This was adhering to guarantee data reliability that is free from biasness and of course collection of 120well-informed data. The role of financial statements in investment decision making appears to be very critical though dependent on some few conditions. The study indicated that investment stakeholder is confident about financial statements in investment decision making. This is mainly because it was also found that to a large extent the financial reports are adequate enough for effective decision making.
Majority of the respondents appeared to be knowledgeable of variables that they need from financial reports. Specifically, the key variables mentioned to aid investment decision making included; gearing ratios, liquidity ratios and profitability ratios.
Having gone through this study the researcher recommend the following as a way of incurring that financial statement plays a vital rule in investment decisions.
1. Every company should ensure that all material fact is reflected in their financial statement.
- These should be prompt provision of the financial statement at the end of each financial year.
- Investment decision should not be on a vacuum or rule of thumb rather, the financial statements should be used as bedrock.
- No investment decisions on a company should be taken without the consideration of a company’s financial statement.
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