ROLE OF FINANCIAL STATEMENT IN INVESTMENT DECISION MAKING. A CASE STUDY OF FIRST BANK OF NIGERIAN PLC

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ROLE OF FINANCIAL STATEMENT IN INVESTMENT DECISION MAKING. A CASE STUDY OF FIRST BANK OF NIGERIAN PLC

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 evaluation of performance of a company. The general objective is to ascertain the role of financial statement in investment decision making. The study will be based on survey and 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 analysing this study are simple percentage 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

Acknowledgement——————————————————————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 Reference

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

CHAPTER ONE

1.0 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 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,

bond holders and trade creditors as a tool of information for

investment decision. Financial statement based on result on past

activities are analyzed and interpreted as a basis for predicting future

rate of returns and assessment of risk.

Financial statement provides important information for a wide variety of decision, 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

increase in the value of their investment [capital gain]. Both dividends and increase in the value of shares of company depends 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.

1.1 HISTORICAL BACKGROUND

For the purpose of this research, first bank plc. Anyigba branch kogi state is selected as a case study for academic purpose

According to google.com [electronic library] first bank of Nigerian

Plc. was established in 1894 as the first bank in Nigeria, a premier in

West African and the leading financial service solution provider in

Nigeria. From being the only bank for decades, weathered the banking

exposure of the 1930,s to 1950s followed by the era of government

ownership and control to a flurry consolidations and then gradual

growth in number banks up to the early 1980s, then yet another

industry growth spurt in early 1990s when the banking sector was

deregulated, leading to an industry shake-up in the late 1990s, which

reduced the number of banks from 126 to 77. At later resuscitation and

growth to 89 banks leading al through the seasons, first bank plc has

remained resilient dependably dynamic and truly the first.

Based on the researchers’ oral interview with the bank officials, the Anyigba branch of first bank plc. was established in the then kwara state in the 1978. They render other services than safe keeping of

money like giving loan to their customers and hire purchase. The

branch presently has about 288 customers.

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