CHAPTER ONE
1.0 INTRODUCTION
Decision making is not the core of every investment activity. A decision is a choice between two or more alternatives. The implementation of meaningful decision gives way for achievement of investment goals and objectives while implementation of wrong decision positively give rise to investment failure.
The ultimate objectives for investment are profit maximization and growth thus it becomes necessary that capital decision have to be made and implemented so as to achieve the aforementioned objectives.
For a meaningful decision that will be used in these objective for an investment to be made available, analysed and studied and through what is derived, decision is made and implemented wither for action, execution or corrective measures where necessary.
One of the important information needed about investment is concerned with financial aspect and the record that contains the financial aspect of an investment is what is referred to as analysis of financial statement referred to as analysis of financial statement analysis.
According to financial statement analysis and interpretation for alert investors by C. Chinelo Ikoku, financial statement components are as follows:
1. The chairman board of directors report
2. The auditor’s report
3. Graphs and figures.
4. Table of accounting date.
Financial analysis via ratios hence it is sometimes referred to as ratio analysis or accounting ratios analysis interpreting investigation into financial statement. The ratios derived from financial statements are used in three different ways namely:
1. Structural analysis
2. Time series analysis
3. Gross sectional analysis.
For investment executions, decision such as buy, certain or sell are necessary. Equally, decision for evaluating management performance, as well as current and future level of risk and profitability is all important. Meaningful decision in all the above mentioned areas will help for a good choice among available portfolio of assets, dividend yield, total return as well as liquidity.
In this project study, concentration will be based on such financial ratio as:
a. Profitability ratio
b. Liquidity ratio
c. Asset management ratio
d. Market value ratio
1.1 STATEMENT OF THE RESEARCH PROBLEMS
Many investors are know to have entered into investment ventures without property understanding such investment opportunity, thus making and implementing wrong decision thereby ending up in folding up when the going proved impossible. At times when the investment activities go on, the aim for such action not realized.
Investment failures have equally been identified with poor management, which arises as a result of mobility of the management of such investment firms in making meaningful decisions required for such investment opportunity.
Many investment are carried out without emphasis laid on those investments that would generate profitable returns in the future, the risk involved and the benefits to be derived if embarked upon given the scare financial resources and the resultant effect of failure. Such set back is the life of an investor and in the case of investment firms, liquidation.
All the above stated problem arises as a result of wrong decision making hence, this study will therefore, identify the means through which meaningful decision can be derived as to enhances the changes available for investment entities or firms through analyzing information concerning such investment opportunities.
1.2 PURPOSE OF THE STUDY
Investment failures have been identified with poor managerial and investors decision approach, which arises as a result of poor knowledge about an investment as to help in making meaningful decisions for investment purpose and realization of goals.
This study intends to find out the following:
1. How analysis of financial statement can help in making meaningful decision, which will enhance investment structure and goal realization
2. To ascertain the different decision bench marks employed by investment
3. To demonstrate the interpretation of computed ratios.
Investment failure has been so pronounced in the recent times. In the process, capitals are lost and set backs experienced as a result of low return to stockholders and in some cases complete liquidation. In this study therefore, the researcher intends to find out how analysis of financial statements will aid in making meaningful decision that will enhance investment chances in realizing objectives to convert loss of capita and set backs experiences or total liquidation.
1.3 RESEARCH QUESTION
The dimension that this research will cover will be based on the following questions, which will help in increasing an insight into the problems under investigation.
1. To investment failure arise from implementing wrong decision?
2. Does poor decision implementation cripple investment grail actualization?
3. Are decision derived from analyzing financial statements?
4. Does poor management arise from inability to evaluate or analyzed investment opportunities?
5. To what extent are decisions derived from financial statement relied?
6. To what extent is decision derived from analysis of financial statement used?
7. How does investment firms make their decision?
8. Do investment proposals require analysis or evaluation to be made on them?
1.4 STATEMENT OF HYPOTHESIS
1. HO: Using analysis of statement while making investment decision will not very significantly with the probability of the investment.
Hi: Using analysis of statement white making investment decision will vary significantly with the probability of the investment
2. HO: There is no significant relationship between investment decision and analysis of financial statements.
Hi: There is significant relationship between investment decision and analysis of financial statements.
3. HO: There is no significant relationship between investment decision and investment profitability.
Hi: There is significant relationship between investment decision and investment profitability
1.5 SIGNIFICANCE OF THE STUDY
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