Project Materials

GENERAL

THE ROLE OF FINANCIAL STATEMENTS IN INVESTMENT-DECISIONS

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PROJECT INFORMATION

Abstract

The research topic of this study is “The role of financial statement in investment decisions” – a study of selected banks in Enugu metropolis. The purpose is to identify the relationship between financial statement and investment decisions, and the impact of financial statement in investment decision making and also to know if investment decisions depends solely on financial statement. The study population is 125 persons who are the member of staff of the five major selected banks. Using the Yaro Yamani formula, the sample size calculated gave (95). The formulated hypotheses were tested using Z test with statistical technique at 5% level of significance. The researcher also made use of primary methods of data collection which included questionnaires and personal interviews. Also the secondary methods of data collection used are library research of relevant materials and existing documents from the selected banks. The researcher recommends that banks in Enugu metropolis should consult the financial statement before making investment decisions, and also it is recommends that all interested parties to financial statement should used required financial ratio analysis for decision making.

TABLE OF CONTENT

Approval page iiDedication iiiAcknowledgement ivAbstract vi

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study 11.2 Statement of the Problems 31.3 Objective of the Study 41.4 Research Questions 51.5 Hypotheses of the Study 51.6 Significance of the Study 61.7 Scope and Limitation of the Study 61.8 Definition of terms 7References 9

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.0 INTRODUCTION 102.1 Historical Development of Business Financial State Analysisand Financial Ratios 122.2 Accounting Information Tools 142.2.1 The Balance Sheet 152.2.2 The Profit and loss Account (Income Statement) 152.2.3 Statement of Accounting Policies 162.2.4 Director Report 162.2.5 The value Added Statement 172.2.6 The five year financial summary 172.2.7 The Auditor’s Report 172.2.8 Notes on the Accounts 172.2.9 A Cash Flow Statement 172.3 Quantitative Characteristic of Accounting Information 18102.4 Use of Accounting Information by decision makers 212.5 Objective of Accounting Information 222.6 Importance of Accounting Information 242.7 Users of Accounting Information and their Objective 252.8 Financial Ratio Analysis 27References 36

CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY

3.1 Research Design 373.2 Sources of Data 373.3 Research Instruments 383.4 Reliability / Validity of research Instrument 393.5 Population of Study 393.6 Sample and Sampling Technique 403.7 Administration of Research Instruments 443.8 Method of Data Analysis 453.9 Decision Criterion for Validation of hypothesis 46References 47

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1 Data Presentation 484.2 Data Analysis 49

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION, RECOMMENDATION

5.1 Summary of Findings 745.2 Conclusion 755.3 Recommendations 77Bibliography 79Appendices 81

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY

Every business prepares profit and loss Account or income statement to ascertain the net result of financial working of the business whether it has earned some income or profit or sustained any loss. It also prepare balance sheet to find out the financial position of the business. Profit and loss account or income statement, retained earnings statement and balance sheet are known as financial statements.Gautam (2005) sees financial statement as financial information which is the information relating to the financial position of any firm; when presented in a concise and capsule form. Besides profit and loss account and balance sheet, some other statements are also prepared for deriving certain conclusions. A schedule of current assets and current liabilities of two years may be prepared to know the changes in working capital. Similarly a fund flow statement and cash flow statement may also be prepared to ascertain the future estimate of cash receipt and payment. Thus, financial state

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