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 1930s 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 al 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 HYPOTHESE

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;

H

o

; financial statements are not used to be relied upon in investment

decision making in a company.

H

1

; financial statement are used to be relied upon in investment

decision making in a company.

H

o

; financial statements are not useful for forecasting company’s

performance.

H

2

; financial statements are useful for forecasting company’s

performance.

H

o

; financial statement does not determine the profitability of a

company.

H

3

; financial statement determines the profitability of a company.

H

o

; financial statement does not project new investors.

H

4

; 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.