Impact of Published Financial Statement on Investment Decision

1.0 Introduction

1.1 Background Of The Study

Accounting information is defined by statement of accounting standard (SAS) No 2 refers to the data that are found in the financial statement. The financial statement provides a continuing history quantified in monetary terms of economic activities or economic resources and obligation of a business.

Accounting information serves as a parameter for evaluating the overall performance of a business enterprise. Accounting information as contained in the financial statement is used in management decisions in the present and future, and in a basis on which past and resulting variances from the predetermined or standards are analyzed and controlled. Thus accounting information communicated by accounting records vis
vis published financial statement serves as a guide to management and shareholders indecision to invest or dis-invest.

Accounting information as contained in the financial statement cannot only be related to management and equity holders, it cut across various categories of users such as the government, creditors Employees, other corporate bodies, financial Analysis and commentators, and potential investors. Financial statements provide information of value to company officials as well as to various outsiders such as investors and Lenders of funds. Publicly owned companies are required to periodically publish general purpose financial statements are includes a balance sheet, an income statement and a statement of cash flow. Some companies also issue a statement of stock holders equity and a statement of comprehensive income, which provides additional details on changes in the equity section of the balance sheet.

Financial statement issued for external distributions are prepared according to generally accepted accounting principles (GAAP), which are the guides for the content and format of the statement. Financial statement includes notes, which are considered as integral part of the statement. The notes contain required disclosures of additional data, users. The financial statement of publicly owned companies also include an auditors report, indicating that the statement have been audited by independent auditors. The auditors opinion is related to fair presentation in conformity with GAAP.

1.2 Statement Of Problem

The financial statement should provide accurate financial information for which the shareholders can effectively manipulate to get the best out of their investment. There is no doubt that some firms or organization encounter problem when they lack financial Statement in taking the investment decision. Some of these problems encountered are:

1. Poor statement of cash flow i.e. the company will be unable to measure the flow of cash into and out of the company.
2. They will lack statement of financial position i.e. unable to list the companys asset and claims against them.
3. Lack statement of earning, i.e. they will not have the summary result of their companys business operation (revenue and expenses).
4. They will have problem of financial management, which involves all the activities that will enable companies to obtain capital for growth, allocate their resources efficiency, and maximize the income potential of their business activity which the management requires.
5. They will not know how to maximize resources and utilization.
6. They will not know when to acquire/ absorb another business to expand and poor financial practices.
7. Expose to variety of risk taking without the proper background information.
8. They will have problem in deciding where and when to plunge their resources, which are limited.

1.3 Objective of the Study

The researcher aims at achieving the following objectives:

1. To identity the Impact of Published Financial Statement on Investment Decision
2. To identity the problems which lack of published financial statement creates on investment decision of a company.
3. To find out a solution to the existing problem.To appraise the usefulness of the financial statement to investors.
4. To review the extent of the appreciation of such financial information and the use in investment decision.

1.4 Research Questions

The research work intends to provide answers to the following questions;

• Do you consider published financial statement important to investment decision?
• Is there any direct influence of published financial statement on investors to their decision-making?
• Does lack of published financial statement create problem on investment decision to many investors?
• Do investors insist on reading published financial statement of companies before making their decision?
• Are investors normally satisfied with the information content of the financial statement?

1.5 Statement Of Hypothesis

As a guide to the achievement of the objectives of the study. The following hypothesis was formulated:

Ho: The investors investment decision making does not depend on the shareholders to understand financial statement.

Hi: The investors investment decision making depends on the ability of the shareholders to understand financial statement.

Ho: Lack of published financial statement does not create problem on investments decision of a company.

Hi: Lack of published financial statement create problem on investment decision of a company.

Ho: The observed improvement in the liquidity and profitability position of the company does not justify the cost of maintaining an effective investment decisions?

Hi: The observed improvement in the liquidity and profitability position of the company justifies the cost of maintaining an effective investment decision?

1.6 Significant Of The Study

This study is going to have theoretical and practical significance.
Theoretically, this study is going to contribute to the general knowledge of financial statement by showing the importance of published financial statement to investment decision making of companies.

Practically, this study is going to be of immense importance to students carrying out research on published financial statement.
This study will also be of importance to students in tertiary institutions and future researchers.

It will also be of use to companies, private bodies and the general public and it will also be of help and great importance to investors as well as the management of companies in their investment decision.

Finally, it will also act as source of information to wide range of users for assessing the stewardship of management and making economic decisions.

1.7 Scope of the Study

The scope of the study for this research work is on first Bank of Nigeria Plc Lagos, which is the leading company in the banking sector. It involved the following specialized banking services.

• Consumer banking services
• First education saving scheme
• Value card service
• Master card
• First retirement saving scheme (FRSS)
• Western Union Money Transfer
• The bank has its subsidiaries and Affiliates
• First trustees Nigeria limited
• First register Nigeria limited
• Value card Nigeria PLC (VNP)
• First insurance Brokers limited
• Kawaka Discount House limited (KDHL)
• Bonque International Du Benin (BIDE)

1.8 Limitation Of Study

This research work will be constrained by certain factors. The chief of which will be timed. The availability of time for data collections will be inadequate to permit an extension of the scope of the work.

There will be also impediments due to finance, since the researcher will still be a student. Expenses in the respect of photocopying and collection of material and transportation will be much.

Finally, problems that will be experienced with the respondents also retarded the pace and result of the researcher. The indifferent attitude will of the most respondents will be nothing to write home about, as they may feel that the questionnaire may not be returned while some may not duly complete it.

1.9 Operational Definitions Of Terms

Financial statement: It is a collection of data organized according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm.

Income statement: This reflects the effect of management operating decisions on business performance and the resulting profit and loss for the owners of the business over a clearly specified period of time.

Management decision: Is the process by which the top management decides what action to taken by the management for betterment of the company.

Investment decision: It is the decision taken by investors before investing in that firm/company.

Financial information: It is the financial accounting record of a company / firm.