1.1 Introduction
The financial accounting system is one that is well designed to facilitate the smooth, efficient and uninterrupted flow of data from the point where a transaction occurs through the various stages of data processing to the final stage, thereby culminating in a report.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Limitations of the Study and Definition of technical terms.
1.2 Background of Study
The impact of financial information on the profitability of a business organization is becoming more apparent to user groups of a financial statement. Information is a not an exact science neither are business operations without some subjective and judgmental errors when it comes to reporting them. A financial reporting therefore is a document statement which informs the various interest groups to a business on the operations and performance of their business in a period under review its present state of affairs as well as its anticipated future, in accordance with the statutes. If a financial report is to service its purpose it ought to be characterized by the following: Relevance, Understandability, Reliability, Completeness, Objectivity, and Timeliness.
In the information process of an organization is to provide the information required to prepare a financial report which shall have the above characteristics then the transaction doing the period must be recorded prompt by and accurately and interpreted in conformity with the Generally Accepted Information Principles (GAAP), Statements of Information Standard Board (NASB), International Information Standard committee and the companies and Allied Matters Act cop LFN (CAMA)
Financial information reporting become necessary with the obvious need for accountability of stewardship from the managers to whom investors entrusted their financial resources. The Railway age in the UK. Occurred between 1830 to 1870 and for the first time the world same the emergence of multimillion corporations with large numbers of shareholders. It was a period of disorder but it brought the basis for the present day system of corporate financial report. Financial reporting is a duty of stewardship assigned to the directors of a company by section 334 of the company and Allied Matters Act Cap L20 LFN, equally the mandatory responsibility of companies to keep information records derives its strength from section 331 and 382 of the same act. These sections explicitly defined the necessary content and manner in which financial records should be kept.
Therefore, in Nigeria Breweries where the research was carried out, the activities that was conducted is to know the Impact of Financial Information on the Profitability of Business Organization in Nigeria.
1.3 Statement of the Problem
The study “The impact of financial information on the profitability of business organization” aims at investigating the financial reports of selected companies in Enugu State with a view to determine the following;
- The extent to which a standard financial report contributes to or detracts from the growth of a business organization.
- The extent to which the financial reports of corporate business organization comply with statutory provisions.
- The uniformity and conflict which exist in the financial reporting regulations given the multiplicity of regulators.
Therefore, bused on the above statements, the researcher shall investigate the financial information reporting standards and every regulation their bear on the financial statement and to the extent the selected company (s) has either complied with or disobeyed the relevant statutes.
1.4 Aim and Objectives of Study
The aim of the study is to determine the Impact of Financial Information on the Profitability of Business Organization in Nigeria using Nigeria Breweries as a Case Study. In achieving this aim, the following specific objectives were laid out as follows:
- To examine the adequacy of the basis and the fundamental that guides its preparation.
- To assess the degree to which the financial report meets the needs of its various users.
- To examine the extent to which the financial report conform to the established standard.
- To investigate the influence that financial report has on business performance.
- To present suggestions and recommendations based on my findings.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- Does the information disclosed in the financial statements adequate to support good decision making?
- Does the disclosure requirement of the statutes affect corporate performance positively or negatively?
- Do companies comply strictly with the regulation?
- Does the financial report meet the needs of the various users?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: The information provided in financial statements is not adequate to support good decision making.
- H1: The information provided in financial statements is adequate to support good decision making.
Hypothesis Two
- H0: The disclosure requirement of statements does not affect corporate performance positively.
- H1: The disclosure requirement of statements affects corporate performance positively.
Hypothesis Three
- H0: Corporate organizations do not comply strictly to the statutory regulations.
- H1: Corporate organizations comply strictly to the statutory regulations.
Hypothesis Four
- H0: Financial reports do not meet the needs of the various users of financial information.
- H1: Financial reports meet the needs of the various users of financial information.
1.7 Significance of Study
This study is a very important one and most significant at this period of economic situation which has witnessed the collapse of giant corporate with impressive profit and loss accounts and balance sheet statement, because the financial report serves is a “prima facie” evidence on the state of attains of such companies as well as its performance and could be relied upon as a certificate because it had the auditors certification, financial reporting could be done with every ser business, utmost good faith and diligence.
This study will be of immense benefit to researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.8 Scope of the Study
This study could have covered the Impact of Financial Information on the Profitability of Business Organization in Nigeria but due to the challenges of such a task especially the financial resources with which to execute it, it is limited to braving industry. The study used the Nigerian Breweries plc, Enugu.
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Definition of Terms
Auditor: A person who is qualified to examine the accounts of an organization to see that they are in order.
Balance Sheet: A business as at a specified date.
Bank: A financial institution whose responsibilities among others is to keep deposits for their client and customers.
Government: An institution of the state whose responsibility is to maintain law and order in the society.
Prima Facie: Sufficient to establish something legally until disprove later.
Researcher: An enquiring basically concerned with search knowledge.
