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THE USEFULNESS OF FINANCIAL STATEMENT AS A GUIDE TO INVESTMENT DECISION MAKING (A CASE STUDY OF ETERNITY LTD, SAPELE)
It is a fact that the usefulness of financial statement cannot be over emphasized, thus, this study was under taking to highlighting the users and analysis the problem associated with the usefulness of financial statement.
For these objectives to be achieved, we undertook a marketing company called “Eternit Ltd Sapele” we also held an oral interview with some selected staff of the company. Our findings reveal that the major problem facing company knows what optimum level of financial statement to maintain at any given level of the business organization. In conclusion, a good financial statement does not necessary gurantive profile, so we recommended that proper operational policy should be done for them to be a correct estimation that will be required at all level of the business activities.
1.1 Background of the Study
Since the formulization of separation of management from ownership of public limited liability companies, there is the need for a formalized way of reporting to the owners of the business on how efficient has the management utilize the share the holders funds over a specified period hence the financial statement.
Financial statement is a combination of income statement and balance sheet of the reporting entity at a particular point in time. Having a financial statement prepared does not really tell how the business has fared in the recent time, but subjected of the result to the various analysis and interpretation.
An organization to start with generally needs the fulfillment of many requirement of law accounting to nation of origin.
In starting up a firm, the requirement needed is that the promote must need some laid down requirement i.e adequacy of capital number of the director and secretary, power of the company, the power of board of director and there must be documented registered the Corporate Affair Commission (CAC) in Abuja the requirement for operation apart from their normal expenses of day to day running of the business, the organization is expected to fill an annual return to the corporate affairs commission (CAC) time firstling after their six mount of commandment of business called statutory report of financial statement.
1.2 Statement of the problem
The second point of filling report sound: retesting i.e investing in public liability company via decision base on financial report of the company.
The investing company public sector invest in such company based on the report investing public who are individual even highly education individual sector patronized their accountant or management conduct or broken sacking to invest based on their report post performance rather on either that is why the researcher bases his hypothesis on financial statement.
A guide to investment decision has contributed to shape the structure of the economy.
1.3 Objective of the Study
If is cessation to identify the objective (or purpose) of financial statement is to determines.
- To determine the usefulness of financial statement in guiding investment decision
- To determine the relevant investment policies put into play by government and how they have aided investment decision
- To know what information should be provide
- To know how information should be presented
- To make appropriate recommendation based on finding and conclusion
- To determine what extent has the financial statement been use in investment decision.
The current thinking is that the objectives of financial statement are to provide information decision making.
1.4 Research Question
The following research question were formulated in the course of the research work.
- Are there different in the behavioral attitude of investors in Nigeria?
- Do the investors base their decision on reported performance of the budget company?
- Has the investment of Nigeria have any significant on the structure of Nigeria economy?
- Are there any structure changes noticeable?
- Are there advantages attached when a company complies with the report pattern of CAMA 1990 (Company and allied matter Art)?
1.5 Significance of the Study
The researcher study will be among the other thing provide valuable information which will be useful to the research to aid this knowledge, other researcher as a basis of reference as well as business people who deals in financial capital market.
The study will also educate the various categories of the people stated above on the financial statement and how risk could be managed using various strategies available to improve the economy.
1.6 Research Hypotenuses
In order to find relevant information to the question missed in the statement of problems, the choice was made to enable the researcher to collect all relevant information for the study with ease, therefore there is a need to formulate hypothesis which will form a story basis investment decision making.
- a. H0: Financial statement preparation does not have significant effect on investment decision making.
H1: Financial statement preparation has a significant effect on investment decision making.
- b. H0: Decision making does prevent effective linkage in preparation of financial statement.
H1: Decision making does not prevent effective linkage in preparation of financial statement.
1.7 Limitation of the Study
Due to differently encountered in the purpose of carrying out project work, it has its own limitation. However in the course of this study, a number of problems where encountered and this include;
The problem of financial constraint which prevented the researcher from travelling around the all Local government area to get the information more relevant data for the research. By reason of the limitation it was virtually impossible to get as much information we anticipated for this research study.
1.8 Definition of Terms
Financial Statement: Financial statement is the annual report and account which include the balance sheet and profit or loss Account.
Balance Sheet: This is a statement of the total assets and liabilities of an organization at a particular date usually the last day of the accounting period.
Profit and loss: these show the result of operation of the company for their reporting period and also explain what has happen since the previous balance sheet.
Short term investment: short term investment is when return is expected over a short period of time usually with one year.
Long term investment: Long term investments are those financial commitments which return span over a series or multiple of year’s ramping from five year, ten year and above.