ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT AS A MANAGERIAL TOOL FOR DECISION MAKING

Financial Statement Analysis and Interpretation is a very vital

instrument of good management decision-making in business

enterprise. Good decisions ensure business survival, profitability and

growth. Without financial statement analysis in investment decisions,

an enterprise is likely to make decisions, which could spell its doom.

Poor or lack of qualitative financial statement analysis could lead to

investment returns, low profitability and even inability to identify viable

investment opportunities. The main objective of this project is

therefore, was to determine how firms could use financial statement

analysis and interpretation to aid management decisions and to avert

the problems highlighted above. Primary and secondary data are

employed to broaden the scope of this study. Primary data are

sourced from questionnaire responses. This provided data for the

validation of the hypotheses tested with the use of chi-square (X2).

The test revealed as follows: (1) Significant difference between the

returns of the financial statement in Analysis and Interpretation based

on management decision. (2) Organizational profitability has

relationship with financial statement analysis and interpretation based

management decision but not significantly. The project concludes

that companies should pay great attention to the use of financial

statement analysis so as to properly equip themselves with this

invaluable tool. The researcher recommends the following: (a)

Accountants or financial analysts should not be rushed in collection,

preparation, analysis and interpretation off financial statements. (b)

Financial statements should be made to reflect current cost

accounting to eliminate or reduce the effects to historical cost

principle and inflation risk element. (c) A combination of different

ratios should be used in analyzing a company’s financial and/or

operating performance. Proper use of financial statement analysis

should be made not only in investment but also in other areas of

decision making.

TABLE OF CONTENT

Title page - - - - - - - -- - i
Approval page - - - - - - - - ii
Dedication - - - - - - - - - iii
Acknowledgement - - - - - - - iv
Abstract - - - - - - - - - v
Table of content - - - - - - - - vi
Chapter One: INTRODUCTION
1.1 Background of the Study - - - - - 1
1.2 Statement of Problem - - - - - - 4
1.3 Objectives of the Study- - - - - - 4
1.4 Research Questions - - - - - - 5
1.5 Hypotheses of the Study - - - - - 6
1.6 Significance of the Study - - - - - 6
1.7 Scope of the Study - - - - - - 7
1.8 Limitation of the Study - - - - - - 7
1.9 Definition of Terms - - - - - - 8
References- - - - - - - - 10 Chapter Two: LITERATURE REVIEW
2.1 Introduction - - - - - - 11
2.2 What is Financial Statement?- - - - 12
2.2.1 Objective of a Financial Statement Analysis - 13
2.3 Uses and Users of Financial Statement - - 14
2.4 Classification of Financial Statement - - 15
2.5 Relationship among the Statement of Financial
Position, Income Statement, Statement of cash
Flows and Statement of Retained Earnings - 18
2.6 Techniques and financial Statement Analysis and
Interpretation - - - - - - 19
2.6.1 Horizontal Analysis - - - - - 19
2.6.2 Trend Analysis - - - - - - 20
2.6.3 Vertical Analysis - - - - - - 24
2.6.4 Ratio Analysis - - - - - - 24
2.7 Definition of Ratio - - - - - 24
2.8 Types and Classification --- - - - 26
2.8.1Liquidity Ratios - - - - - - 27
2.8.2 Leverage Ratios - - - - - - 30
2.8.3 Activity Ratios - - - - - - 32

9
2.8.4 Profitability Ratios - - - - - 34
2.9 Nature of Accounting Ratios - -- - - 37
2.10 Uses of Ratio in Analyzing Financial Statement 39
2.11 Limitations of Financial Statement Analysis - 40
2.12 Use of Different Accounting Principles - - 40
2.13 Industry Affiliation - - - - - 41
2.14 Accounting Differences Between Countries - 42
2.15 The Impact of Inflation of Financial Statement
Analysis - - - - - - - - 42
2.16 Features of a Good Management Decision
Technique - - - - - - - 44
2.17 Environment of Management Decision Making- 45
References - - - - - -- - 47
Chapter Three
3.1 Research Design- - - - - - 4
3.2 Sources and Method of Data Collection --- - 48
3.3 Research Instrument - - - - - 49
3.4 Reliability/Validity of Research Instrument - 49
3.5 Population - - - - -- - - 50
3.6 Sample size and Technique - - - - 50

3.7 Administration of Research Instrument - - 53
3.8 Method of Data Analysis - - - - 53
3.9 Decision Criteria for Validation of Hypothesis - 56
References- - - - - - -- 57
Chapter Four: DATA PRESENTATION AND ANALYSIS -58
4.1 Data Presentation - - - - - 60
4.2 Analysis of Question - - - - - 61
4.3 Test of Hypothesis - - - - - 71
Chapter Five: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary of Findings - - - - - 76
5.2 Conclusion - - - - - - - 77
5.3 Recommendations - - - - - 77
Bibliography - -- - - - - 79
Appendix - - -- - - - - - 80

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APA

Ndudi, O. (2019). ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT AS A MANAGERIAL TOOL FOR DECISION MAKING. Afribary. Retrieved from https://track.afribary.com/works/analysis-and-interpretation-of-financial-statement-as-a-managerial-tool-for-decision-making

MLA 8th

Ndudi, Okwunna "ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT AS A MANAGERIAL TOOL FOR DECISION MAKING" Afribary. Afribary, 14 Feb. 2019, https://track.afribary.com/works/analysis-and-interpretation-of-financial-statement-as-a-managerial-tool-for-decision-making. Accessed 25 Nov. 2024.

MLA7

Ndudi, Okwunna . "ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT AS A MANAGERIAL TOOL FOR DECISION MAKING". Afribary, Afribary, 14 Feb. 2019. Web. 25 Nov. 2024. < https://track.afribary.com/works/analysis-and-interpretation-of-financial-statement-as-a-managerial-tool-for-decision-making >.

Chicago

Ndudi, Okwunna . "ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT AS A MANAGERIAL TOOL FOR DECISION MAKING" Afribary (2019). Accessed November 25, 2024. https://track.afribary.com/works/analysis-and-interpretation-of-financial-statement-as-a-managerial-tool-for-decision-making

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