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.

CHAPTER ONE
1.0 Introduction
1.1 Historical background
1.2 Statement of the problem
1.3 Objective of the study
1.4 Research hypotheses
1.5 Research questions
1.6 Significance of the study
1.7 Scope of the study
1.8 Limitation of the study
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction
2.1 Features of financial statement
2.2 Functions of financial statement
2.3 Objectives of financial statement
2.4 Analysis of financial statement
2.5 Users of financial statement
2.6 Attributes of an ideal financial statement
2.7 Types of financial statement
2.8 Definition and nature of investment decision
2.9 Importance of investment decision
2.10 Types of investment decision
2.11 Investment evaluation criteria
2.12 The role of financial statement in investment decision making
2.13 Types of ratios and their uses-
    Reference
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
3.1 Research design
3.2 Area of the study
3.3 Population of the study
3.4 Sample size and sample technique

3.6 Sources of data collection
3.7 Methods of data collection
3.8 Method of data presentation and analysis
3.9 Validity of instrument used
3.10 Reliability of the instrument used
Reference
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Data presentation
4.2 Data analysis
4.3 Test of hypotheses
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of findings
5.2 Conclusion
5.3Recommendations
Bibliography
Appendixes  
 

 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 all 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.

1.2   STATEMENT OF THE PROBLEM
It is observed that the role of financial statements in investment decision making in Nigeria has some problems to both investors and managers of business organizations who are either not aware of the importance of interdependence relationship that exist between investors and business organizations. Such problems include;

i.    How analytical tools are set to aid prospective investors in accessing the financial position of the corporate organization.
ii.    Evaluation of performance of a company in investment decision making.
iii.    How to determine the profitability of a company.

The above listed problems are the problems to look into in this research work. The problems analyzed tend to scare away both existing and potential investors. The reason of this study is to adequately look into the above problems and suggest possible solution to any of them. Nevertheless this research will find possible key factors to solving these problems because financial statement in investment decision making in Nigeria is the life blood of every organization to the potential investor.'/

1.3   OBJECTIVE OF THE STUDY
The  general  objective  is  to  ascertain  the  role  of  financial statement in investment decision making. The specific objective is as follows;
i.     To examine how a set of analytical tools will aid prospective investors  in  assessing  the  financial  position  of  the  corporate organization.
ii.    To  evaluate  the  performance  of  a  company  for  investment decision making.
iii.    To determine the profitability of the company.
iv.    To  appraise  the  fundamental  use  of  financial  statement information, this is to provide information for investment decision making.

1.4   RESEARCH HYPOTHESIS

Hypothesis according to the English dictionary is an unproved theory, proposition sent forth as an explanation of something, often as the basis for further investigation. Hypothesis is the guides for the investigators in the entire process of research endeavor and they keep the researcher on the main line of the study, in this research, the following hypothesis are formulated for the study;
Ho; financial statements are not used to be relied upon in investment decision making in a company.
H1;  financial  statement  are  used  to  be  relied  upon  in  investment decision making in a company.
Ho;  financial  statements  are  not  useful  for  forecasting  company’s performance.
H2;  financial  statements  are  useful  for  forecasting  company’s performance.
Ho;  financial  statement  does  not  determine  the  profitability  of  a company.
H3; financial statement determines the profitability of a company. Ho; financial statement does not project new investors.
H4; new investors are projected by financial statement.

1.4   RESEARCH QUESTIONS
According to Uzoagulu [1998; 96], research questions guide the researcher in constructing the questionnaires. Therefore the researcher raised the following research questions to guide her in constructing her questionnaire which are instruments in the study. The questions are as follows;

i.    To what extent is financial statements used in the investment decision making in a company?
ii.    Are  financial  statements  useful  for  forecasting  company’s performance?
iii.    Do  financial  statements  determine  the  profitability  of  an organization?
iv.    Do financial statement projects new investors?

1.6   SIGNIFICANCE OF THE STUDY

This study will be of immense benefit to banks by improving the banking  performance  financial  analysts,  investors,  companies  and financial organizations. This is because the study intends to help these stockholders  in  decision  making.  The  study  will  help  in  widening knowledge financial statement in investment decision making, it will also make the organization to appreciate the importance of sound financial  statement  in  the  provision  of  information  necessary  for decision making. It will review the improvement in the organization handling the financial statement and show equally the ways through which improvement could be accomplished finally this research will equally serve as a reference to students in this noble institution and
other school who may be interested to embark on a further research study of this nature and above all, report of this study shall definitely add to existing knowledge in research methodology.

1.7   SCOPE OF THE STUDY

This  study  will  be  limited  to  a  geographical  entity  known  as Nigeria and specifically first bank plc. Anyigba branch, kogi state of Nigeria.

1.8   LIMITATION OF THE STUDY
There are some limitations encountered by the researcher in the process of this research which limited the scope to only first bank plc. Anyigba branch, some of the limitations are as follows;
i.     Uncooperative attitudes of the respondents; the researcher could not  get  some  necessary  information  from  the  respondents because of their negative attitude in their response to the oral interview with the bank officials and the questionnaires.
 ii. Time  constraints;  despite  the  time  provided,  it  was  not  still enough for the researcher to go all the relevant places like banks and company etc to get relevant information and due to the combination of project and academics work.
iii.     Financial constraints; financial constraints is also another factor
that limited the researcher to go to many branches of first bank and even other banks and organizations. The researcher lacked finance for transportation, electronic library etc. and as such was limited to only Anyigba branch of first bank plc.