This research work was designed to appraise the financial statements in assessing the performance of companies and in giving investment, government and others, what the companies are worth. The purpose of this study is to find out whether investors carry out analysis of financial statements before making investment decisions and how the company’s financial statements are influenced by political instability.
To achieve the objective of this study, the researcher formulated questionnaires, which were administered to the respondents to gather data drawn from the subject being studied. The data entered were analyzed using simple percentage method.
The following findings among others was made that company financial statement are of immense importance to be analyzed by prospective investors and the management so as to know what a company is worth and based on the findings, the researcher recommended among others that in taking investment decision, companies should present information so obtained and translated into financial statement in a clear and simple form to the management, shareholder or investors.
APPROVAL PAGE ii
TABLE OF CONTENTS vi
- INTRODUCTION 1
- Background of the study 1
- Statement of problems 5
- Objectives of the study 5
- Research Question 6
- Significance of the study 7
- Scope of the study 8
- Limitations of the study 8
- Definition of terms 9
- LITRATURE REVIEW 13
- Introduction 13
- Development of generally
Accepted accounting principles 28
- the objectives of statement
of changes in financial position 30
- users of financial statement 31
- characteristics of good financial Information 34
- SUMMARY, CONCLUSION AND RECOMMENDATIONS 38
- Summary 38
- Conclusion 39
- Recommendation 40
- BACKGROUND OF THE STUDY
Financial statements are part of which is to communicate information about the company to those who have a right to receive it for instance shareholders. Financial statement provide an indication if the company’s trading performance.
As a minimum, financial statement includes profit and loss account, balance sheet and related explanatory notes and also cash flow statements.
The analysis of financial statements is therefore the interpretation and transaction of facts and data contained in the financial statements. The purpose being the drawing of relevant conclusions operation, financial position and future prospects.
The procedure involves the analysis of data contained in the financial statements. For example, in carrying is a very important figure. Similarly, in balance sheet analysis, the components are net assts which is usually compared with capital, loan stock and involving capital.
Transaction of those data into clear and simple form: the translation process may lead to extraction of ratios or percentages that established relationship between comparable data or even the presentation of graph and charts, and also drawing relevant, conclusion and making inferences concerning the company’s financial position, stability, profitability and solvency.
Presentation of information so obtained for decision making. The information is used for future controls and policies. The application of this information will involve the isolation of the factors responsible for the state of affairs revealed by the analysis. The analysis could be horizontal or vertical, internal or external.
Horizontal analysis is a comparison of data in financial statements of two or more consecutive accounting periods to detect whether performance has improved or not. For example, the profit if a company in a year can be compared with those of another year which a trend may arise from the analysis. This analysis is internal as if concerns financial data of one company alone.
A horizontal analysis of financial statement can be internal when a comparative study of data between one company’s financial statement and that of another company over a given time is wholly internal and involves a comparative analysis of data between one company’s financial statement and trite of another company over a comparative analysis of data in financial statement within a single period.