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 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.