IMPACT OF FINANCIAL INFORMATION ON THE PROFITABILITY OF BUSINESS ORGANIZATION IN NIGERIA

Description

IMPACT OF FINANCIAL INFORMATION ON THE PROFITABILITY OF BUSINESS ORGANIZATION IN NIGERIA

CHAPTER ONE

INTRODUCTION 

Background of the Study

This research is on Impact of financial information on the profitability of business organization in Nigeria. The impact of financial information on the profitability of a business organization is becoming more apparent to user groups of a financial statement.

Information is a not an exact science neither are business operations without some subjective and judgmental errors when it comes to reporting them. A financial reporting therefore is a document statement which informs the various interest groups to a business on the operations and performance of their business in a period under review its present state of affairs as well as its anticipated future, in accordance with the statutes. If a financial report is to service its purpose it ought to be characterized by the following;

1. Relevance
2. Understandability
3. Reliability
4. Completeness
5. Objectivity
6. Timeliness

In the information process of an organization is to provide the information required to prepare a financial report which shall have the above characteristics then the transaction doing the period must be recorded prompt by and accurately and interpreted in conformity with the Generally Accepted Information Principles (GAAP), Statements of Information Standard Board (NASB), International Information Standard committee and the companies and Allied Matters Act cop LFN (CAMA).

Financial information reporting become necessary with the obvious need for accountability of stewardship from the managers to whom investors entrusted their financial resources. The Railway age in the UK. Occurred between 1830 to 1870 and for the first time the world same the emergence of multimillion corporations with large numbers of shareholders. It was a period of disorder but it brought the basis for the present day system of corporate financial report. Financial reporting is a duty of stewardship assigned to the directors of a company by section 334 of the company and Allied Matters Act Cap L20 LFN, equally the mandatory responsibility of companies to keep information records derives its strength from section 331 and 382 of the same act. These sections explicitly defined the necessary content and manner in which financial records should be kept.

1.2 STATEMENT OF THE PROBLEM

The study “The impact of Financial information on the profitability of business organization” aims at investigating the financial reports of selected companies in Enugu State with a view to determine the following ;

1. The extent to which a standard financial report contributes to or detracts from the growth of a business organization.
2. The extent to which the financial reports of corporate business organization comply with statutory provisions.
3. The uniformity and conflict which exist in the financial reporting regulations given the multiplicity of regulators.

Therefore, bused on the above statements, the researcher shall investigate the financial information reporting standards and every regulation their bear on the financial statement and to the extent the selected company (s) has either complied with or disobeyed the relevant statutes.

1.3 OBJECTIVES OF THE STUDY 

The objectives of this study are to critically examine the financial reports of the selected company and to probe into the fundamental for their preparation as well as its presentation with a view to determining:

1. The adequacy of the basis and the fundamental that guides its preparation.
2. The degree to which the financial report meets the needs of its various users.
3. The extent to which the financial report conform to the established standard.
4. The influence that financial report has on business performance.
5. Finally, to present suggestions and recommendations based on my findings.

1.4 RESEARCH QUESTIONS

In order to determine the impact of financial reporting on the corporate performance of business organizations, it is pertinent to test the following question;

1. Does the information disclosed in the financial statements adequate to support good decision making?
2. Does the disclosure requirement of the statutes affect corporate performance positively or negatively?
3. Do companies comply strictly with the regulation?
4. Does the financial report meet the needs of the various users?

This study will offer solutions to ones raised it is my believe that the result of these finding will go a long why to helping researchers in this area of study, it will also enhance the understanding of the structure of published reports and accounts by the users.

The various users groups of the published financial report have their benefits from this study as follows:

4. The Potential Investors: These are groups who are interested in committing their financial resources to the buying of the company’s shares. These set of people will benefit from this study as the result of this study still arm them with the necessary tools with which to evaluate the financial report of a corporate organization as it affects them.
5. The General Public: This group shall benefit from this report by the knowledge that the business organization exists for them and not against them, as such has to live up to its full responsibilities.
6. The Regulators of Financial information Report: This group includes the Nigerian Information Standard Board (NASB), the companies and Allied Matters Act 2004 Cap (20 LFN (CAMA) the Banking and Other Financial Institutions Act of 1991 (BOFIA), prudential guidelines for licensed Banks. The Insurance Act 2003. The study will help them to standardize and harmonize their operations.
7. The Employee Group Including Existing: Potential and past employees.
8. The Government Including Tax Authorities Department who have Interest in the Financial Reports of Companies: The result of this work shall be of immense assistance to each to these user groups in the advancement of their interest.

1.5 RESEARCH HYPOTHESES

The following null and alternative hypothesis shall be tested in this research works:

1. H0: The information provided in financial statements is not adequate to support good decision making.

Hi: The information provided in financial statements is not adequate to support good decision making.

2. H0: The disclosure requirements of statements do not affect corporate performance positively.

Hi: The disclosure requirements of statements do not affect corporate performance positively.

3. H0: corporate organizations do not comply strictly to the statutory regulations.

Hi: corporate organizations do not comply strictly to the statutory regulations.

4. H0: Financial reports do not meet the needs of the various users of financial information.

Hi: financial reports do not meet the needs of the various users of financial information.

1.6 SIGNIFICANCE OF THE STUDY

This study is a very important one and most significant at this period of economic situation which has witnessed the collapse of giant corporate with impressive profit and loss accounts and balance sheet statement, because the financial report serves is a “prima facie” evidence on the state of attains of such companies as well as its performance and could be relied upon as a certificate because it had the auditors certification, financial reporting could be done with every serious business, utmost good faith and diligence.

1.7 SCOPE OF THE STUDY

This study could have covered the impact of financial information reporting on corporate performance of all the sectors of the Nigerian economy but due to the challenges of such a task especially the financial resources with which to execute it, it is limited to braving industry. The study used the Nigerian Breweries plc, Enugu.

1.8 LIMITATIONS OF THE STUDY

The limitations encountered by the researcher of this work are given as follows:

1. The confidential nature of financial information information in the business organization posed as a problem to this business organization posed as a problem to this study.
2. The researcher was unable to reach all the members of the sample as a result of their frequent travels and busy schedule.
3. The sample used in the research though representative but it is relatively small compared to the population, as a result of lack of financial with which to carry out the research on a greater sample.

1.9 DEFINITION OF TERMS

Auditor: A person who is qualified to examine the accounts of an organization to see that they are in order. 17

Balance Sheet: A business as at a specified date.

Bank: A financial institution whose responsibilities among others is to keep deposits for their client and customers.

Government: An institution of the state whose responsibility is to maintain law and order in the society.

Prima facie: Sufficient to establish something legally until disprove later.

Researcher: An enquiring basically concerned with search knowledge.