Role of Financial Statement in Investment Decision Making : Current School News

Role of Financial Statement in Investment Decision Making

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Role of Financial Statement in Investment Decision Making.

ABSTRACT

Corporate organizations owe a duty to fully disclose matters concerning their operations so as to aid investors in making investment decisions because Investment decision-makers rely on information obtained from financial statements to predict future rates of return.

Without the financial statement, there will be a problem of how to determine the profit of a company, and the evaluation of the performance of a company.

The general objective is to ascertain the role of financial statements in investment decision-making. The study will be based on a survey and a questionnaire will be used to gather information. There is a total population of 70 personnel but the sample size is 60 using Taro Yamane’s formula. The methods used in analyzing this study are simple percentages and chi-square.

We discovered from the test of hypotheses that financial statement is relied upon in investment decision making and financial statements are useful for forecasting company’s performance.

Concluded was drawn based on the findings that financial statement plays a vital role in investment decision making and recommends that no investment decision should be taken without the consideration of a company’s financial statements.

TABLE OF CONTENT

Cover page——————————————————————————i
Title page——————————————————————————-ii
Certification page——————————————————————–iii
Dedication—————————————————————————–iv
Acknowledgment ——————————————————————v
Abstract——————————————————————————-vi
Table of content——————————————————————–vii

CHAPTER ONE
1.0 Introduction———————————————————————1
1.1 Historical background———————————————————2
1.2 Statement of the problem—————————————————3
1.3 Objective of the study——————————————————–4
1.4 Research hypotheses———————————————————5
1.5 Research questions———————————————————–6
1.6 Significance of the study—————————————————-7
1.7 Scope of the study————————————————————8
1.8 Limitation of the study——————————————————-8

CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction——————————————————————10
2.1 Features of financial statement——————————————12
2.2 Functions of financial statement—————————————–12
2.3 Objectives of financial statement—————————————-13
2.4 Analysis of financial statement——————————————-14
2.5 Users of financial statement———————————————-14
2.6 Attributes of an ideal financial statement—————————–18
2.7 Types of financial statement———————————————-21
2.8 Definition and nature of investment decision————————29
2.9 Importance of investment decision————————————-32
2.10 Types of investment decision——————————————-34
2.11 Investment evaluation criteria——————————————36
2.12 The role of financial statement in investment decision making42
2.13 Types of ratios and their uses——————————————-43
Reference

CHAPTER THREE RESEARCH METHODOLOGY
3.0 Introduction——————————————————————-49
3.1 Research design————————————————————–49
3.2 Area of the study————————————————————-50
3.3 Population of the study—————————————————-50
3.4 Sample size and sample technique————————————–50
3.5 Instruments for data collection——————————————52
3.6 Sources of data collection————————————————-52
3.7 Methods of data collection———————————————–53
3.8 Method of data presentation and analysis—————————54
3.9 Validity of instrument used———————————————-56
3.10 Reliability of the instrument used————————————56

CHAPTER FOUR DATA PRESENTATION AND ANALYSIS
4.1 Data presentation———————————————————–58
4.2 Data analysis——————————————————————58
4.3 Test of hypotheses———————————————————-67

CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of findings——————————————————–72
5.2 Conclusion———————————————————————73
5.3 Recommendations———————————————————-74
Bibliography ———————————————————————-76
Appendixes ———————————————————————78

INTRODUCTION

Corporate organizations owe a duty to fully disclose matters concerning their operations so as to aid investors in making investment decisions.

Both large and small organizations in addition to satisfying the legislating requirement tend to retain existing investors and to attract potential ones through the publication of their financial statements where the capital stock of a corporation is widely held and its affairs are of interest to the general public relations.

The discussions and illustrations of the study will be centered on the financial statement presented to shareholders and also available for potential investors, bondholders, and trade creditors as a tool of information for investment decisions.

Financial statements based on results on past activities are analyzed and interpreted as a basis for predicting the future rate of returns and assessment of risk.

The financial statement provides important information for a wide variety of decisions, investors draw information from the statement of the firm in whose security they contemplate investing.

Decision-makers who contemplate acquiring total or partial ownership of an enterprise expect to secure returns on their investment such as dividends and an increase in the value of their investment [capital gain].

Both dividends and an increase in the value of shares of a company depend on the future profitability of the enterprise. So investors are interested in future profitability.

Past income dividend data are used to forecast returns from dividend and increase in share prices.

BIBLIOGRAPHY

Adebiyi, K. A. et al. (2006). ICAN Study Pack Financial Accounting. Nigeria; V. I Publishing Ltd. Akinsoyime, A. B. (1990). The Objective of Accounting in a Dynamic Society Seminar NCAI Jos.
Black, J. (1990). Some Financial Analysis Techniques ACCA Student Newsletter.
Chukwuemeka, E. O. (2002). Research Methods and Thesis Writing: A Multi-Disciplinary Approach. Nigeria; HRV Publisher.
Drury, C. (2004). Management and Cost Accounting. 6 th edition. Singapore; Seng Lec Press. Ezeamama, M. C. (2005). Fundamentals of Financial Management. Enugu; Ema Press Ltd.
Gautam, U. S. (2005). Accountancy. New Delhi; Vrinda Publications.
Heinz, W. and Harold, K. (2005). Management: A Global Perspective. 11th edition. New Delhi; Tata McGraw-Hill Publishing Company Ltd.
Jenfa, B. L. (2000). Study Notes on Professional Seminar NCA Jos.
Jennings, A. R. (2004). Financial Accounting. 2 nd edition.Nigeria; Thomson Learning.
Lucey, T. (2002). Costing. 6 th edition. Britain; ELST Publication.
Osuala, E. C. (2005). Introduction to Research Methodology. 3rd Edition. Enugu; Africa First Publisher Ltd.

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