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.
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
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
1.2 Statement of
The second point of filling report sound: retesting i.e
investing in public liability company via decision base on financial report of
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
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
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.
following research question were formulated in the course of the research work.
Are there different in the behavioral attitude of investors
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)?
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.
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
a. H0: Financial statement preparation does not have
significant effect on investment decision making.
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
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
1.8 Definition of
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.