principal aim of this research work is to show financial statement analysis and
the degree investors can rely on financial statement and also to show how to
analyze and interpret financial statement to intend users. Questionnaires were
administered through which data were collected the secondary source were
analysis using ratios. The research find out that the liquidity ratio of the
bank was good which means the bank is highly liquid to meet it short term debts
needs, the researcher recommendation amongst others was that investors at all
level should at all times analyze and interpret financial statement before
making investment decision that will affects the investors plans. Also that in
the case of analysis and interpretation of financial statement, a qualified
Accountant should handle it and communicates the results to the interest party.
OF THE STUDY
According to America Accounting Association,
Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
From this definition, it can be seen that the main objective of accounting is
to provide economic information that will enable the users to make decisions.
to Patrick .A. Casabona (2006), Investors and creditors throughout the world
base their decision on the information published in various financial and
economic reports issued by business entities.
important of these, are the annual and quarterly reports that depicts an entity
profitability and financial condition, which investors and creditors reviews
carefully before investing their fortunes. It is therefore, imperative that
these reports convey information that reflects the economic reality of an entity
in a meaningful, transparent and comparable fashion.
Recently however, there have been a host of
corporate financial scandals accompanied by fraudulent financial reporting in
Nigeria, which have affected the very foundation of corporate financial
reporting and investor’s confidence. Obviously, this had an adverse effect on
investor’s confidence in the Global financial reporting process and ultimately
on the market values of corporate equity securities. These activities leads to
swift actions by Government and their regulatory agencies, i.e. accounting and
Auditing standards setter and other financial influential organizations around
the world, in other to restore public confidence in the global financial
The use of
different accounting standards by different countries over the years has also
had an adverse effects on the flow of investment capital across borders, which
has negatively affects international economic growth an security valuations.
However, due to economic, political and regulatory developments, progress
toward attaining a convergent set of Global financial accounting reports in
which users of accounting information base their opinion has to some extent be
accounting statements are summaries of monetary data about an enterprise and
are used in an attempt to help make informed decision in the present and
future. However, financial statement portrays the operation of transaction and
other event by grouping them into element according to their economic
characteristics. Many entities of the world ultilise financial statements,
those financial statement may be drawn up for private individuals non-profit
organization manufacturers and service industries but it is worth noted, that
the these groups that takes much advantage of the usefulness of financial
statements are large corporations, governments and the third one which is the
topic of discuss “investors”.
statement plays a decisive role in each of these entities. Corporations decided
how much credit to extend to customers and how much should be distributed to
investors as dividends. Investors use company’s financial statement to decide
whether or not, it would prove advantageous to invest their fortuned money and
if so, what percentage to invest. The government uses financial statement to
determine how much an entity is required to pay as taxes, each decision stated
above does not always require the same financial information however, a balance
sheet would be used in the decision making process for assessing a competing
firm and determining a customers credit unit. It provides the users with data
about available resources as well as the claims to those resources. An income
statement is prove useful in determining credit extension to customers,
distribution of dividends, taxes and investment opportunities. It provides the
users with data about the profitability of the enterprise. Detailing source of
revenue and the expenses, which reduce profit. A cash flow statement would be a
useful tool in each instance because it gives a brief description of how much
cash is coming in, going out and where exactly, it reports on cash flow from
investing, financing and operating activities. Although each one is unique in
its own respect, each financial statement is a necessary tool in making any
OF RESEARCH PROBLEM
is carried out to investigate into some areas where attention has not be
focused. Some of these problem is researcher attempts to solve is the inability
of most business organizations to sustain their existence on the long run which
is attributed to academic weakness. However investors today no longer rely
alone on the financial statements produced by the directors of company (Union
Bank, Nig Plc), because of lost of confidence on the statements, that the set
of financial statement might not represent the true and fail view of the
company’s financial position, investors might also have the fear that the
company have declared adequate profit through cash flow analysis in other to
build investors confidence whereas that is not the true position of the company
economic situation. Financial statement also does not guarantee the viability
of the company and it does not reflect the substance of the company on the long
run. These and many more problems a worth assessing in other to, advance a more
realistic measure in making in investment decisions
OF THE STUDY
aims at achieving the following objectives,
To determine if the state of Affairs of the company
can attracts more investors to invest through than annual reports, analysis,
advertisement or publication.
To find out the confidence investor lay on the
financial statement presented by the directors of the company.
To ascertain if the fluctuation’s on the profit after
taxation will attracts / dis-attracts investors in their investments decision
and confidence build on the company
OF RESEARCH HYPOTHESIS
attempting to reach a decision, it is useful to makes assumptions about the
population involved in the study. Such assumptions which may not be true are
called hypothesis. In this study the hypothesis will,
A. To determines
if there is any significances relationship between the state of affairs of the
company and investors in there investment decisions.
Ho: There is no
significances relationship between the state of affairs of the company and
investors in their investment decisions.
Hi: There is no
significance relationship between the state of affairs of the company and
investors in there investment decisions.
B. Is there is
significance relationship between the financial statement and the confidence
build on the company.
Ho: There is no
significances relationship between the financial statement and the confidence
build on the company.
Hi: There is
significance relationship between the financial statement and the confidence
investors lay on the company.
1.5 SCOPE OF
This research cantered on the
investor’s reliance on the financial statement of the company. It shows the
extent to which investors can make analysis of the Bank financial statement and
for taking meaning decision as to, whether to invest / continue in businesses
or to doctrine from investment on the company under review.
OF THE STUDY
The study plays significant role in
student, lecturers, analyst, government, institution and companies’ activities
on their investment interest and judgment. However, the study should be able to
help investors to realize the importance of analyzing financial statement by
using ratio on a single year data before decision taking. The study is
considered crucial for highlighting and analyzing the following views;
Informing actual or potential investors whose concern
are their returns on investment.
Informing creditors who rely on the current financial
position and solvency of the firm as a parameter for measuring the firms
Informing as many users of accounting information the
need of proper analysis therefore taking decision
OF THE STUDY
Basically, there has been a number of
limiting factors that affected this research work, thee factors includes;
Time constraint: This research work was carried out
amidst of the academic tight schedule and this in no small way affects the
limitation was the difficulties involved in reaching some top employees of the
bank due to their tight schedule, who could have give me first hand information
to enhance the research work.
Non-co-operation of respondent; Respondent to the
questionnaire were adamant in given first hand information that will aid the
progress of the work.
BACKGROUND OF THE CASE STUDY (UNION BANK NIG PLC)
Union Bank of Nigeria Plc was established as a
colonial Bank with its first branch in Lagos in 1925. Barclays Bank acquired
the colonial Bank, which resulted in the change of the Bank’s name to Barclays
Bank (Dominion, colonial and overseas) following the enactment of the companies
Act 1968 and the legal requirement for all foreign subsidiaries to be
incorporated locally. Barclays Bank (D C O) in 1969 was incorporated in
Barclays Bank of Nigeria limited. The ownership structure of Barclays Bank
remained un-changed until 1971 when 8.33% of the Bank’s shares were offered to
Nigerians. In the same year, the Bank was listed / Quoted on the Nigerian stock
exchange. As a result of the Nigeria enterprises promotion act of 1972, the
federal government of Nigeria acquired 51.67% of the Bank’s shares, which left
Barclays Bank Plc, London with only 40%. By the enactment of the 1972 and 1977
Nigeria enterprises promotion acts, Barclays Bank international disposed its
shareholding to Nigerians in 1979. To reflect the new ownership structure and
in compliance with companies an Allied Matter Act of 1990. It assumed the name
Union Bank of Nigeria Plc.
with the central Bank of Nigeria’s banking sector consolidation policy. Union
Bank of Nigeria Plc acquired the former universal Trust Bank Plc and Broad Bank
Ltd and absorbed its erstwhile subsidiary Union merchant Bank ltd. The Bank
also increased its shareholders funds through a public offer/rights issue in
the last quarter of 2005. With these developments, Union Bank remains one of
the most capitalized banks in Nigeria. It has a shareholders funds of
N119, 160 billions and operates through
405 network of branches that are well spread across the country all of which
are on-line real time.
of Nigeria Plc have over the years had the below stated subsidiaries and
Union Home Saving and Loans Plc
Union Trustees Limited
Union Assurance Company Limited
Union Bank UK Plc
Banque Interational du Benin, Cotonau
UTL Communications Services Limited
UBN Property Company Limited
Union Capital Markets Limited
Union Registrars Limited
(a) Consolidated Discounts Limited
(b) HFC Bank Ghana Limited
(c) Unique Venture Capital Management Co Limited.
Groups operates an interlocking organizational structure where by some board
members of the Union Bank of Nigeria Plc act as external directors in the
subsidiaries and associated companies. This arrangement ensures effective
oversight and participation in the decision making process of these companies,
thereby safeguarding the Bank’s investments.
Today, the Bank is a leading regional
bank in sub-sahara Africa in terms of its diverse investments across the globe.
A grance of the Bank’s financial summary reveals its solidity. As at 31st
march, 2008 the Bank’s gross earnings was
988 billion, profit before tax was N33, 012 billion, total assets was N1, 128 890 billion and shareholders find
was N119, 160 billion.
The Bank’s management in headed by Dr.
Barth B. Ebong. Oon as the Group Managing Director / Chief Executive, other
Abduliahi Executive Director (Commercial Banking -South)
Adeyemi Executive Director (Commercial Banking -Lagos)
Ayininuola Executive Director (Commercial Banking -South)
Emereum Executive Director (IT and Operations)
Esangbedo Executive Director (Risk management & control)
Executive Director (Corporate Resources)
Obigwe Executive Director (Corporate and International Banking).
Section 331 of companies and Allied
Matter Act 1990 (CAMA); defines “financial statement as those records required
to prepared and kept by every directors of a company containing the day to day
transactions of accounting information to take adequate decision about the
organization. Those records include;
Balance sheet: Which can also be referred to as the
statement of financial position or condition, it reports on the company’s
assets, liabilities and net equity as of a given point of time.
Income statement: This can also be referred to as
profit and loss account, it reports on a company’s income, expenses and profit
/ loss over a given period of time profit / loss account provider information
on the operation of the enterprise. These information includes sales, and
various expenses incurred during the processing state.
Statement of return Earning: This explains the changes
in a company are retained earning over the reporting period.
Statement of cash flow: This reports on the company’s
cash flow activities particularly its operating, investing and financing
activities Professional Accountancy Tutors pointed out the following:
Accounting information: There are set of data that are
found in a financial statement of an enterprise.
Accounting period: These are referred to as the times
span, usually one year, which the financial statement of an enterprise covered.
However, some organization produces quarterly, half year and some annual
Notes on the accounts: This form an integral part of a
financial statement and provide detailed or supplementary information in
respect of items disclosed in the Balance sheet and profit and loss account.
Sources and application of find statement: This
provides information on the derivation and utilization of funds during the
period covered by the financial statement.
Value added statement: This reports on the wealth
created by an enterprise during the period covered by the financial statement.
It usually shows how the wealth created is distributed among various interest
group (e.g. employees, government, creditors and proprietors).
Historical financial summary: This enables an instant
comparison over a period. Usually five years, of vital financial information
about an enterprise- turnover, profit before and after tax, dividends, assets
employed, issued and paid up capital, reserves, medium and long-term
liabilities, earnings and dividends per share.