INVESTORS PERCEPTION OF PUBLISHED FINANCIAL STATEMENT
(A CASE STUDY OF SELECTED INVESTORS IN ABA)
ABSTRACT
The aim of this research is to examine investor’s perception of published financial statements. A total of fifty (50) investors were examined for the purpose of this study however, forty (40) responded positively, giving this project 80% response rate. Financial statement is a prerequisite for accessing the financial performance of the firm an investor wishes to invest his resources.
It is the primary source through which shareholders are informed on the activities and operations of the companies in which they own shares. It was discovered that most investors do not consider if necessary to read through the financial statement before making investment, which at times result to poor financial inflows to the investors. It was also discovered that most investors could not interpret appreciate the financial statement as a result terminology and their low educational status. These classes of people who finds it difficult to understand the financial statement should always employ the services of financial analysis for advice.Areas of concern on the course of putting up this project report consisted investors in construction, petroleum, textile, Engineering, Real Estate, and Banking industries in Aba town of Abia state. Findings also revealed that they examine and consider the profit and loss account as the major area for investment decisions. However, the researcher therefore recommends that, investors should not only depend on the profit and loss account of firms but should also inspect other areas such as, source and application of funds, five year financial summary, the chairman’s and Director’s report, and the balance sheet.
LIST OF TABLE
Table 4.1:Questionnaire Response Table
Table 4.2:Determining the areas of relevance investors examine before investing in firms.
Table 4.3: Determining if investors read and understand firms financial statement
Table 4.4: Determining if investors employ the services of a financial analysis for advice.
Table 4.5: Determining the items in financial statement investors consider most when making investment Decision
Table 4.6: Determining the section of annual report investors like to read.
Table 4.7: Determining the industry investors prefer investment to others
Table 4.8: Determining how often investors inspect financial statement of their firms.
TABLE OF CONTENT
            CHAPTER ONE
1.0         INTRODUCTION                                                                              
1.1         Statement of Problem                                                         
1.2         Purpose of the study                                               
1.3         Significant of the study                                                       
1.4         Statement of Hypotheses                           
1.5         Scope of the study                                       
1.6         Limitations of the study                                           
1.7         Definition of terms                                       
CHAPTER TWO
2.0         REVIEW OF RELATED LITERATURE
2.1         Development of financial reporting                                  
2.2         Balance sheet                                                          
2.3         Income statement or profit and loss Account      
2.4         Statement of sources and Application of funds
2.5         Value Added statement                  
2.6         The need for financial statement  
2.7         Credibility of financial statement              
2.8         Information source.                                     
2.9         Fundamental security Analysis                            
2.10      Radio Analysis of published financial                 
statements.
2.11      Problems associated with Published
financial statements
2.12      Overview of the Nigeria stock Exchange                        
2.13      Industry investing                                        
2.14      Users and uses of Company’s                  
financial statement.
       CHAPTER THREE
3.0         RESEARCH DESIGN AND METHODOLOGY
3.1         Source of Data                                                         
3.2         Sample used                                                            
3.3         Method of investigation                                                      
CHAPTER FOUR
4.0         DATA PRESENTATION AND ANALYSIS          
4.1         Data presentation and Analysis                
4.2         Test of Hypotheses                                      
CHAPTER FIVE
5.0         SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1         Findings                                                        
5.2         Conclusion                                                               
5.3         Recommendation                            
BIBLIOGRAPHY                                                                  
APPENDIX (Questionnaire)                                              
CHAPTER ONE
In Nigeria today, it is not common as in some countries for people who are otherwise ignorant of the principles of accounting and financial management to find themselves on the boards of companies where a sound knowledge is highly desirable from financial expert. Investors who must have the best out of their investment decision must of necessity have adequate knowledge of relative performance of the companies in which they have or intend to hold securities.
To investors, the annual financial statement is a valid source for understanding of the financial status of a company and its operations. Failure on their part to understand and reasonably analyze the information contained in the financial statement would normally lead to poor investment or inefficient allocation of scarce resources.
However, the objective of published financial statement is to bring satisfaction to investors. According to Nwayanwu (2001) the objective is to inform parties interested in the organization as to the strengths, weakness and profitability. Also, according to Nwoha (1998), the objective of financial statement is to provide information regarding a firm’s transactions and resources, which should be relevant for making economic decisions by persons, investors, and organizations outside the entity. The diverse interest of users of financial statement makes it necessary to carryout this study.
More so, understanding the financial statement is vital in the decision making process. It provides information on balance sheet, profit and loss account, value added statement, notes on accounts, sources and application of fund statement, and historical financial summary.
The preparation and presentation of financial statement is one of the indices can be made and executed. Investors read, assimilate, and appropriate information disclosed in financial statement accordingly and of course, place reliance on it and should intense greater expansion on accuracy in order to enhance the perceptibility of invertors on whether or not to invest.
1.1         STATEMENT OF THE PROBLEM
It has been discovered that in some years past, investors have been making wrong decision in their bid to invest in firms. This wrong decisions been made by these investors are consequent on the fact that they do not take time to peruse the published financial statements of firms before investing. Some firms equally have not even understood the need of publishing their financial statement at the end of an accounting period. Because some unenlightened investors out of negligence make such investment, some unscrupulous management of firms mismanagement such fund only to have such firms liquidated in no distant time, thereby placing investors of risk of loosing their funds.
In the past, companies have differed widely in the way in which they have presented information on investment. But schedule I of the companies Act now requires them to be shown in the balance sheet either under fixed Assets and or current Assets.
 Some companies do not take to disclose adequately, vital information that will be needed by investors for meaningful investment. However, the research on this topic is keen towards, ensuring that firms understand the need to relay adequate information about their performance to outsiders willing to invest. The concept of adequate disclosure is an important generally accepted accounting principle. Adequate disclosure means that users of financial statement are informed of any fact necessary for proper interpretation of the statement.
1.2         PURPOSE OF THE STUDY
The main purpose why any research is undertaken is to add to the existing stock of knowledge. According to Reilly (1989) “ the purpose of the financial statement analysis is to help evaluate management performance as regards profitability, efficiency, liquidity, and risk. However, the study on this topic is to
(a)      Investigate and determine if investors Aba understand and appreciate the nature and wealth of information contained In a published financial statement.
(b)      Determine whether investors familiarize them selves with the facts in the financial statement before arriving at an investment decision.
(c)      Ascertain if investors consider such facts as difference in accounting methods, difference in financial statement, inflation, organization and industrial, economic characteristics before coming up with a final investment decision.
(d)      Find out whether do make reference to financial statement at all before investing or that they just do so even when they do not know the financial capacity of the firm they intend to invest in.
(e)      To highlight investment decisions strategies and find out techniques to enhance the perception of published financial statements.
1.3         SIGNIFICANCE OF THE STUDY
Published financial statements are the main source through which investment and other interest groups get information from companies and other investment outlets. This invariably reveals the previous and current performances of the organization within its operating period and also shows the financial status of the firm’s assets, liabilities and capital at the end of every accounting period. It will also unveil to an investor, how the dividend of a particular firm is being distributed to shareholders in the previous years and the investor would know whether the firm makes provision for retained earning or that the entire profit is being distributed to the shareholders.
 Through financial statement, investors study, analyses investment decision such as, shall we buy shares?  If shares are not profitable, then shall we invest in debentures or acquire a company and so on. In the midst of these conflicting investment decisions, the financial statement will provide accurate financial information, which investors can effectively manipulate to get the best out of their investment decision. When this disclosure is made and there is adequate and accurate financial statement disclosure, investors can interpret correctly and effectively, the financial information disclosed as to maximize their investment potentials.
ccounting is essentially a means of communication to an investor on the financial activities of the firm he wishes to invest. More so, accounting information is taken to mean facts or data that have surprise effects on the receiver and this have a value greater than its cost and potentially evoke a response could be decision maker. The response could be positive or negative depending on the effect such data or fact have on the receiver based on the ability of the investor to understand the financial statement.
Accounting information also among other qualities has to be relevant for it to make any meaning to the users of such information. According to spillers and Gasman (1984) “ the idea of relevance is elusive because it is a subjective measure of information content”. Relevant information is that which is responsive to the audience’s information needs. It is capable of making a difference to the user of the information. Investors and other users, rational or irrational decision makers are contingent upon the type of information available to them in the financial statement. For this reason, the companies and Allied matters Act (CAMA) 1990, SAS 2 recommends that ; “All accounting information that will assist users to assess the financial liquidity, profitability, and viability of a reporting entity should be disclosed and presented in a logical, clear and understandable manner”. Financial statement presents a numerical picture of a company’s financial and operating wealth since companies defers in activities, analyst needs to examine the financial statement of the industry characteristic and as well as difference in accounting methods.
A sound investment decision must be made after an intelligent analysis of financial statement of the company concerned and the industry to which the company belong and of course, with economic trend analysis. Different organizations have come up with standards to guide accounting practice before the CAMD 1990. Like the Nigerian Accounting standard Board (NASB) statement of accounting standards are intended to introduce some uniformly in the practice of accounting generally.
Currently, there is this body of opinions that published financial statements of pre – CAMD (1990) do not reveal enough facts to the as compared to those programmed in the post – (CAMA) 1990 period. Of all the documents about a company which is available to investors, other users of accounting information, directors and senior managers; the published financial statement are the most defiled, rigorously drawn up, carefully tested, regularly produced, widely circulated and mostly published. Therefore, it involved a process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the entities that are expected to have community of existence into the future.
 It is my earnest hope that the result of this study will benefit investors on their perception of published financial statements. It is pertinent to note that the information needed by the investors must be state of indifference because the significance of this study is to ensure that they have the right information they needed for decision-making. If investors do not know what information they need, they will have no right to complain about inadequately of information they have received, as letter or no information will lead to wrong choice of investment or resulting entirely to a loss sequel to inadequate information.
1.4         STATEMENT OF HYPOTHESES
The hypotheses written below will be tested HYPOTHESES 1
Ho: meaningful investment is not dependent on investor’s ability to read and understand the financial statement.
H1: meaningful investment is dependent on investor’s ability to read and understand the financial statement.   
HYPOTHESES 2
Ho: published financial statement is not the major source of information for investment decision
 H1: published financial statement is the major source of information for investment decision.
HYPOTHESES 3
Ho: Financial statements are not yardstick for determination of a company’s performance.
H1: Financial statements are yardstick for determination of a company’s performance.
1.5       SCOPE OF THE STUDY
The scope of this study would be basically limited to Aba Township.
There shall be a survey of private investors and shareholders pf selected private firms in Aba, Abia state. Due to the available time or length of period to complete this project, the findings from this study shall be used as a basis for generalization to other private investors and shareholders of private companies in Nigeria.
1.7         DEFINITION OF TERMS
(a)          Investment: this means the current commitment of funds for a period of time in order to derive a future flow of funds that will compensate the investing unit
(b)          Private investors: this means those individuals who are shareholders in companies.
(c)          Investment Decision: this means the decision to buy or to hold off interest in companies.
(d)          Financial statement: this means the annual report published by companies yearly, which include the balance sheet, profit and loss account, statement of source and application of fund, value added statement, financial policies, five years financial summary, and notes to the accounts.
(e)          Shareholders: individuals holding shares of a companies
(f)           Financial information: this is any information dealing with the operation of a company and the way funds are utilized.
(g)          Investors perception: is a process by which individual investors organize and interpret the financial statement to their impression or understanding in order to give meaning to investment decision.
(h)          Accounting information: refers to data that are found on financial statement of organizations.
(i)            Quoted securities / investment: this means investments that are dealt in on a recognized stock Exchange.
(j)            Negative investment: investments that will bring no growth in the real sector of the economy.
  (a)     Monthly
(b)    Quarterly
(c)   Yearly