Abstract
This project work is carried out to examine the impact of financial statement on financial management decision making of an incorporation. The Brass micro finance bank is used as a case study. Data were collected through a well structured questionnaire and the information elicited from the respondents were analyzed through tabular presentation of data, frequency distribution and percentages. The findings revealed that financial statement have contributed immensely to the financial management decisions of small scale business in Nigeria and most especially Banks.
CHAPTER ONE
INTRUDUCTION
- Background Of Study
At present, the Foundation is one of the most important units for the establishment and formation of any economy, in a way that affects and is affected by the frustration in which it settles, and cannot live away from the changes and developments that are accelerating daily. whether direct or indirect impact on the institution and its growth, these changes have contributed significantly to the emergence of economic concepts for the administrative and financial aspects. This requires the entrepreneurs in these institutions to adapt to them and take them into account in trying to determine the status of the institution in the environment in which it operates. Among competitors based on scientific methods used in the decision-making process. This varies depending on the size of the institution and its activities and functions (Khawla, 2016).
As the world is witnessing contemporary developments, which cast a shadow on the patterns and trends of relations in many economic and social fields. it has followed these developments, and became a service activity concerned with providing information to various parties, whether internal or external dealing with economic unity. In the field of business environment, many problems have arisen for institutions, including accounting institutions, which is mainly due to the different accounting standards between countries, which led to the inevitability of increasing interest in accounting information, which is the results of the accounting system. This is the basis for any decision-making process, which is built to compare this information in many institutions at different stages of time, and this required the development of accounting function in standard methods, as well as the disclosure of accounting information, especially in relation to the financial outputs of institutions (Zager, 2006).
The financial accounting system is the backbone derived from the International Accounting Standards, which is based on a set of concepts and principles used as a framework for reference (Ben Omar, 2015), where the output of the financial accounting system in any institution consists of financial statements and reports. It aims primarily at providing information related to the financial situation of the institution, in addition to the results of its activities. It also contributes to clarifying the financial and monetary flows and changes and changes in equity. A lot of other information is added to these lists to complement the information included in these lists, through the disclosure of the various accounting methods and principles used by the institution or organization in preparing its own lists (Dabash, Khamili, 2017).
With the large size and multiplicity of institutions, and the multiplicity of direct and indirect parties to the activity of the institutions, the financial statements have become public and impartial to one category without another, which required some studies and analyzes of these lists in order to meet the needs of users of special information that allows for better financial decisions. The information provided by the lists is not accessible without the study and analysis of this information through financial analysis tools, whether in providing useful indicators that measure the financial capacity of the institution, or information useful in knowing the efficiency of management or the extent to which the economic institution exploits its economic resources. Financial analysis also helps to provide financial information that is useful in predicting financial failure, and the consequent critical decisions in how an organization operates. As the financial decision-making process is one of the most important organizational procedures and roles played by the members of the institution, and the decision-maker cannot do its work unless available to him information. This necessitates an indepth study and numerical analysis of the financial statements before any financial decision is taken, so that the manager can discover the strengths and best exploit, and identify weaknesses to take the necessary corrective actions (Ahlam, 2016).
In the Kingdom of Saudi Arabia, and within the framework of the efforts exerted to achieve the Kingdom’s Vision 2030, the Kingdom seeks to develop the financial sector through several development programs, where the Council for Economic Affairs and Development launched an executive program concerned with the development of the financial sector to achieve the objectives of the Kingdom Vision 2030. This is to be a diversified and effective financial sector to support the development of the national economy, stimulate savings, finance and investment, and increase the efficiency of the financial sector to face and address challenges. By seeking to achieve financial inclusiveness, financial stability and transparency with regard to the financial statements and financial statements of companies, as this gives the financial statements of companies high quality and confidence generated by individuals make him think seriously about the Saudi investment environment as a stimulating environment characterized by the quality of information produced by the accounting system (Financial Sector Development Program Document, 2018).
It is not an over statement when one says that the banking industry is the flume on which the national economy rotates. This mammoth, impact upon a country economy therefore makes it a public affair is everybody in the country has a right to know what such organizations are doing, more so all information, necessary to explain the organization’s activities fully should be provided in the annual reports.
One of the most significant aspects of the information system of business enterprises in an economy is that which deals with the communicate of financial data, especially in describing business profitability and financial position. This information is important because it attempts to partial the economic resources of the enterprises and the financial results, which have been achieved by its management when those resources have been put to use. It attempts to reveal how effective management has been in resources utilization as well as the financial reward available to compensate for risk taken by various suppliers of capital.
- Statement of the Problem
The genuineness or other wise of financial statement has attracted diverse opinions from different quarters, such opinions can come from the general public, tax authorities, shareholders, creditors with long or short term interest, financial analyst and potential investors. They argue that the financial statement do not usually give an accurate data about the activities of such business concerns, for example, the idea of stating assets at their historical cost do not favor most investors as they argue that inflation is not usually taken care of, though the real value of such assets might have been eroded.
Again since the financial statement prepared by managements, the shareholders and others argue that there would usually be some elements of bias on the part of management in the disclosure of management’s financial ineptitude.
But in any case the management claims that some inherent problems would usually affect the accuracy of such reports. It is therefore the intention of this researcher to delve into the matter to enable him establish a relationship between financial reporting and performance evaluate in a bank.
1.3 Objectives of the Study
Companies including those in the banking industry have had to face the onerous task of presenting a credible and generally acceptable financial statement in their annual reports, to the various people to whom they own such obligations. The purpose of the study is:
- To determine the various financial statement used by banks.
- To ascertain the problems of using financial statement to assess performance of banks.
- To determine if there’s a relationship between financial statement and performance evaluation of a bank.
- determine the impact of financial statement on the financial management decision making
- Research Questions
The study has the following research questions as its focus:
- Has Financial statements of banks influenced your investment decisions?
- To what extent has financial report help in assessing bank performance?
- Does financial report indicate banks performance?
1.5 Research Hypotheses
Based on the statement of problem and objections of this research work the following general hypothesis are formulated:
Ho: Investment decision, base entirely on the financial statement will not lead to poor and lazy decisions.
H1: Investment decision based entirely on the financial statements will lead to poor and lazy decisions.
H0: Financial report are not a true in director of banks performance.
H1: financial statement are a true in director of banks performance.
1.6 Significance of the Study
The banking industry is a very important sector of the economy. This is because banks can determine the direction of growth or development of the economy through the financial service rendered by banks. The financial services which includes, funds mobilization, safekeeping and custodianship, funds transfer, foreign exchange transaction equipment leasing, extension of loans and advances, investment in securities, bill discounting etc.
Investment key sector of the national economy of which the banking industry is one becomes a goal-getters priority. Owing to this, it becomes necessary that financial statement presented by banks satisfy the need of the users of the reports.
Specially, at the end of this study, we would have been able to establish:
Whether or not the financial statement affects investment in the banking industry.
Whether or not the annual financial report currently reflect the inflationary effects.
Whether or not banks follow rigid accounting practices.
The emphasis of this research is not to discuss the determinants of performance, but to establish a relationship between financial reporting and performance so that potential investors is in banking industry may clearly define the stand.
- Scope and Limitation of the Study
The aim of the study is to examine, the use of financial reporting in assessing banks performance, however it will be restricted to investigations carried out on First bank of Nigerian Plc.
To enable the research have a broad view, the study will not be based on one branch. A study of some selected branches of the bank will also be carried out.
But in any case, the following among others are the numerous constraint, while are envisaged;
LITERATURE: The dearth of related books and journals will no doubt affect the quality of the research.
TIME: The greatest employer of man, which is time was not in my favour though I manage it considering the time allocated to my studies, and the project.
FINANCE: The research work generally involves money but considering my stand as a student. I was limited by financial in achieving my gim of have a population rather I found myself in using sample size, even visit to my case of study.
RESPONSE RATE: The information to be analyzed in the study will be limited to those who would respond voluntarily to the questionnaire.
PAUCITY OF INDUSTRY: At the course of my research I come to realize that many banks does not have any form of inter-relationships which make things difficult for me in using one set of information generated as touching planning and control in UBN to generalize issues. That leads me into more research, which will continue even after this profit.
1.8 Definition of Terms
AUDITING: The objective examination of financial statements initially prepared by management by a third party other than the prepared or used with the goal of establishing the fairness of representations made therein and reporting on same a guides to interested users.
ATTEST: To assume responsibility for the fairness and dependability for the fairness and dependability of financial statements.
BANKRUPT: Inability of person to meet his liabilities as they mature.
FRAUD: Misrepresentation by a person to be untrue or made with reckless indifference as whether the fact in true with the intention of deceiving the other party and with the result that the other party is injured.
FINANCIAL STATEMENTS: This covers balance sheets, income statement or profit and loss accounts notes and other statement and explanatory materials.
GOING CONCERN: Continuing in operation for the foresable future with the assumption that the enterprise has neither the intention nor the
LIQUIDATION: Process of winding up of a company thereby brings to an end its corporate existence.
TRUE AND FAIR VIEW: The opinion of an auditor, which depicts compliance, will generally accepted accounting principles and full of fair disclose of facts.
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