AN ASSESSMENT OF FINANCIAL STATEMENT AND ITS USEFULNESS IN ASSESSING THE PERFORMANCE OF AN ORGANIZATION
- Project Research
- 1-5 Chapters
- Quantitative
- Chi-Square
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
Background Of Study
A farmer who planted corps expects results, just as a student who waits for an exam does. The same may be said for an investor. The farmer may be informed of the outcome in the form of a bountiful crop. A pupil would normally be satisfied with a result sheet or a report card. In the case of an investor, however, the outcome is disclosed through financial reports.
Every limited liability business is required by law to prepare financial reports; these limited liability corporations may be found in almost every area of the economy. Accounting records must be kept by every organization. Accounting records must be sufficient to demonstrate and explain the company's transactions and must be kept in such a way that the company's financial situation may be disclosed with reasonable accuracy at any time.
Financial reports in the banking business are of tremendous interest to the general public since banks deal with individuals directly or indirectly.
This public interest has led to companies (including banks) accepting social as well as economic, financial, and legal responsibilities, and as a result, there is a growing need for information communication to account for the outcomes that are of significant interest to a diverse range of individuals and organizations.
As a result, it is critical that credible information be disseminated to interested parties in order for them to have an understanding of how corporations, notably banks, are operating in respect to the public interest. This reality is reinforced by the proposal of the working team established in Britain by the Accounting Standards Committee in October 1974, chaired by Derek Boothman, to investigate the scope and objectives of publisher financial statements.
The committee suggested that:
"The primary goals of a corporate report are to disclose economic measurements of the reporting organization that are valuable to those who have a legitimate right to such information."
It is hardly an exaggeration to say that the banking industry is the flume around which the national economy revolves. This massive influence on a country's economy makes it a public matter since everyone in the country has a right to know what such organizations are doing, and all information necessary to properly explain the organization's actions should be published in yearly reports.
One of the most important components of a commercial enterprise's information system in an economy is that which deals with the communication of financial data, particularly in explaining firm profitability and financial condition. This information is significant because it aims to segment the enterprise's economic resources and the financial results generated by its management when those resources are put to use. It tries to indicate how efficient management has been in utilizing resources, as well as the financial reward offered to compensate for the risk incurred by diverse capital suppliers.
1.2 Statement of the Problem
The authenticity or otherwise of financial reports has elicited a variety of viewpoints from many sources, including the general public, tax authorities, stockholders, creditors with long or short-term interests, financial analysts, and potential investors. They argue that financial reports do not usually provide accurate data about the activities of such business concerns. For example, most investors do not favor stating assets at their historical cost because inflation is not usually taken into account, even though the real value of such assets may have been eroded.
Again, since management prepares financial reports, shareholders and others claim that there will typically be certain aspects of prejudice on management's behalf in the presentation of management's financial inadequacies.
However, management says that some inherent issues would normally undermine the veracity of such reports. As a result, this researcher intends to investigate into the subject in order to develop a link between financial reporting and performance evaluation in a bank.
1.3 Objectives of the Study
The purpose of the study is:
- To determine the various financial reports used by banks.
- To ascertain the problems of using financial reports to assess performance of banks.
- To determine if there’s a relationship between financial reporting and performance evaluation of a bank.
1.4 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 reports 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 reports 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 reports 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.
1.7 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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