EFFECTS OF PERFORMANCE EVALUATION THROUGH THE ANALYSIS OF FINANCIAL STATEMENT ON INVESTMENT DECISIONS (A CASE STUDY OF LOGMAN NIGERIA PLC.)
This study examined the effects of performance evaluation through the
analysis of financial statement on investment decision, using Longman
Nigeria Plc as the case study. Based on the set objectives of the study,
structured questionnaire consisting of eighteen (18) close-ended
questions and one (1) open-ended questions were developed and
administered on one hundred (100) respondents of the aforementioned
company, but a total of ninety-four (94) questionnaires were completely
filled and returned. Hence, the study employed primary and secondary
data (i.e. questionnaire method, interview method, and data sourced from
established publications). Data collected were analysed with the aid of
chi-square statistical technique. Findings from the study shows that
Performance Evaluation should be in line with achieving Corporate
Objectives and moreover, analyses of financial analysis has helped in
identifying the weakness in company’s operation. The study recommended
that management should ensure that performance evaluation in line with
TABLE OF CONTENTS
CHAPTER ONE INTRODUCTION
1.1 Background to the Study
1.2 History of the company
1.3 Statement of the Problem
1.4 Objectives of the Study
1.5 Research Questions
1.6 Research Hypothesis
1.7 Significance of study
1.8 Scope and Limitation of the Study
1.10 Limitations of the Research Method
1.11 Definition of Terms
CHAPTER TWO: LITERATURE REVIEW
2.2 Effectiveness and Efficiency
2.3 Objectives of Performance Evaluation
2.4 Inter-Firm Evaluation
2.5 Inter-Temporal Evaluation
2.6 Industrial Average Evaluation
2.7 Other Aspects of Performance Evaluation
2.8 The Financial Statements
2.9 Financial Statement Analysis
2.10 Ratio Analysis
2.11 Alternative means of Analysis Financial Statements
CHAPTER THREE: RESEARCH METHODOLOGY
3.2 Research Design
3.3 The Study Area
3.4 The Study population
3.5 Sample and Sampling Technique
3.6 Research Instrument
3.7 Pilot Study: Validity and Reliability
3.8 Method of Data Analysis
3.9 Reason for using Chi-square method
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION
4.1 Background Information
4.2 Research Question
4.3 Test of Hypothesis
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.4 Suggestions for Further Studies
1.1 BACKGROUND TO THE STUDY
Financial analysis involves the assessment of a firm's past, present
and anticipated future financial condition. The objective is to identify
any weakness in the firm's financial health that could lead to the
future problems and to determine any strength that the fine might
The need for financial accounting statement is becoming increasingly
indispensable. This is due to the increased complexity of the economy
and the massive growth of corporate organization.
1.2 HISTORY OF THE COMPANY
Longman Nigeria was incorporated on the 10' August, 1961 as a
subsidiary of Longman group Ltd. A renowned British Publishing Company
founded in 1724. Although, Longman, Green and Company, as this company
was then known had since 1947 had a representation in Nigeria, it had
operated as a mere trading out post of the U.K. parent company
concentrating on the importation and distribution of education books
produced primarily for the British school system.
A study of the progress of Longman Nigeria Plc. over the past
thirty-three years has shown various successful project that have had
powerful influence on the direction and development of publishing
industry and indeed education in Nigeria. The blue-print of Longman's
text development and list building strategies are largely attributable
to its crop of pioneer employees.
1.3 STATEMENT OF THE PROBLEM
Extent to which the company is able to influence its overall performance.
i. Ability to meet its financial obligation in form of dividends to investors.
ii. Inability to meet debt payment on due dates by having sufficient cash available.
1.4 OBJECTIVES OF THE STUDY
The objective of this study is to:
i. Assess the performance of organizations (with particular
reference to Longman Nig. Plc.), in order to ascertain its level of
ii. To see to what extent investors' decision are influenced by the analysis of the company's performance.
iii. Finally interpret and advices where necessary on
appropriate actions to take in order to improve the performance of the
1.5 RESEARCH QUESTIONS:
Financial ratios give the previous year's performance and average
performance in the industry meaningful comparison of a firm's financial
data at different points in time and with other firms. It provides the
basis for answering some relevant questions concerning the well-being of
i. How liquid is the firm?
ii. Is management generating sufficient profit from the firm's assets?
iii. How does the firm's management finance its investment?
iv. Is the common stakeholders recovering sufficient returns on their investment?
1.6 RESEARCH HYPOTHESES
Top executives must know that the effectiveness with which accounting
information satisfies the organization's wider goals depends on to
relevance, time lines and accuracy and the way it is used by member of
Ho: Performance evaluation should be in line with achieving corporate objectives
Hi: Performance evaluation should not be in line with achieving corporate objectives
1.7 SIGNIFICANCE OF STUDY
This research will be useful to management of up and coming
companies. It is aimed at helping organizations in their bid to improve
growth and to allow more investing public. Significantly, this study
will be of benefit in the following areas:
· The study will guide the company in its future planning and growth formation
· It will also guide the company to more purposeful areas investment.
1.8 SCOPE AND LIMITATION OF THE STUDY
The scope of this study will be based manually on the financial
statements of Longman Nigeria Plc. as presented in its annual reports
which would be used to evaluate its performance. The scope of the
research shall cover a period of four years. The balance sheet and
income statement contained in the annual reports shall be analyzed using
ratios to highlight the company's operating performance.
The research will be limited to the publishing industry to which
Longman belongs. This research would also be limited to the performance
of Longman Nigeria Plc in relation to that of its competitors; care
would be taken not to delve into inter-firm comparison but the general
performanceof the company. The personnel function, administrative and
such other functions not financially oriented will not be dealt with.
METHOD OF DATA COLLECTION
The researcher made use of primary and secondary data as supported
with the aid of Annual Reports of the company (Longman Nigeria
Plc.) and that of its competitors in the publishing industry.
1.10 LIMITATIONS OF THE RESEARCH METHOD
The main tool of this research was the annual reports of the
companies under review and the use of ratio analysis to interpret the
information contained in the reports. Hence, the primary data is also
used to elicit information for the study.
With reference to the Annual reports, the information contained
therein were arrived at, in line with the historical cost concept, they
are not perfect indicators of future and may not represent the presents
the naira worth.
1.11 DEFINITION OF TERMS
Performance Evaluation: This refers to the
evaluation of the operating performance of the company. Thus it refers
to the evaluation of the profitability and efficiency of its operation.
Financial statements: This is the collective name
for the items in the company's annual report i.e. balance sheet and
income statement. Those statements represent the final output of the
Ratio analysis: This is the comparison of relationship between two items for a useful interpretation of financial statements.
Profitability: this is profit in relation to investment that generated it.
The company: This refers to Longman Nigeria. Plc
Abata, M. A. (2002): Financial: Theory and practice with Nineteen Accounting Standards.
Areblen, A. R. and Bierman, H (1982): Managerial Accounting An Introduction - 3rd Edition.
Folabi J. (1982): Financial Accounting: Principles and Practice Graham Burn Publisher.