STATEMENT OF THE PROBLEM
Virtually, every economic entity maintains its records on a historical cost basis. The historical cost figures alone are inadequate. This is because net profit is over stated, the balance sheet does not reflect the current worth of the enterprises and inflationary situation, and the charging of the historical cost of operations to profit and loss account may endanger the maintenance of the operating capital of the entity. It is obvious that the current situation of published financial statement has some limitations. This is because the result of operation (net profit) is a function of accounting standards, policies and conventions adopted by a company and used in the preparation of the financial statements. The financial statement should provide accurate financial information; which shareholders can effectively manipulate to get the best out of their investment. It is pertinent to say that analysis and interpretation of any financial statement will descend on the adequacy and accuracy of the said statement and how the financial information is being disclosed so as to enable to shareholder make major investment decision such as “if to hold their shares or sell them and invest in bond other than equity”. If they are to buy more share of the same firm, but the problems statements. 8 i) Some shareholders cannot interpret financial information correctly and cannot be able to make good use of the financial information disclosed to get the best out of their investment. ii) Company’s concepts, conventions and principles are not capable of meeting the user needs. iii) Published financial statements do not induce more people to make investment in some companies. iv) Some shareholders are not oriented before making investment decision. v) Sometimes the dividend are not satisfactory considering the risk involved in investment. vi) Some financial statement sometimes guide the investors. vii) Some financial statement prepared are window dressing. viii) Some company’s find it difficult to make their financial statement available to the shareholder at any point in time.
PURPOSE OF THE STUDY
This research was undertaken to find a better solution to the research problem(s) already existing in this area of study. It is therefore imperative to establish some guiding steps and principles in decision making process which will ensure that a given objective is not defeated and to find out if the financial information that emanate from the published finance statements makes any meaning to investing public. 9 a) To know whether the information in the financial reports of companies and other financial information areas are understood and used for investment decision making. b) To ascertain the extent the company’s concept, convention and principles are capable of meeting users/ investors needs. c) It is deemed to state categorically and in clear terms that the influence of corporate reporting to investment differences in accounting methods and how financial statement deficiency affects the investors (shareholders). d) To ascertain the extent published financial statement induced more people to invest in companies.
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