The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

Project Details

Department
ACCOUNTING
Project ID
ACC022
Price
5000XAF
International: $20
No of pages
90
Instruments/method
Quantitative method
Reference
YES
Analytical tool
Descriptive statistics
Format
 MS Word & PDF
Chapters
1-5

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Abstract

This study looks at the role of financial reporting on investment decision making in Microfinance Institutions(MFIs) Information derived from financial statement reports are very vital in understanding financial situations of MFIs and as such, used as the for decision making. The purpose of this research was to find out the reliability of the influence of financial statements on investment decision making in MFIs precisely, CCC Plc Buea.

The main explanatory tools used here are, the balance sheet, income statement, equity statement and the cash flow statement. Investment decision making enables corporate leaders to analyse various investment opportunities and to show how departments should make good commercial beds.

The researcher used both primary and secondary data to study financial reports and their effects on decision making.

The data were analysed with the use of frequency tables and graphs. The findings showed that financial reporting plays influential roles in making investment decisions with a majority of the staff of ccc plc agreeing to the fact from tables 5 to 9 of the data presented.

To this effect, management should ensure the timely and orderly presentation of reports to help boost investments in the enterprise.

CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background of the study

Generally, the financial statement can also be seen as a summary explaining how a business performed during a certain time frame and what to expect in the future.

Generally accepted accounting principle [GAAP] require a company to prepare a full set of financial statements that conformed to regulatory guidelines and are accurate. A full set of the financial report includes a statement of retained earnings and statement of cash flow.

The good financial statement should document the information in such a way that is easy to read and understand presenting the financial statement clearly and professionally help people interpret the results and plan for a more profitable future. Business growth refers to a company expanding its business through the use of its own resources and asset and growth also depends on the financial statement of an organization.

Financial statement of companies are prepared either using Generally Accepted Accounting Principle [GAAP], defined by the law on accounting and the law financial statement or using International Financial Reporting Standard [IFRS] and International AccountingStandard[IAS], issued by the international accounting standard board [IASB]. Those standard are not enforceable together; therefore, companies choose one of them for reporting purposes. Investment decision making as used by the researcher is a determination made by the director or management as to how, when and how much capital would be spending on investment opportunities. The decision often follows research on the financial standard.

Corporate organizations owe a duty to fully disclose matters concerning their activities to help investors in making investment decisions. Both large and small organizations in addition to satisfying the legislative requirements turn to maintain existing investors and attract potential ones through the publication of their financial statements. Where the capital stock of corporations is widely held and its affairs are of the interest of the public relations.   

Financial statements of companies are prepared either using Generally Accepted Accounting Principles (GAAP) defined by the law of accounting and the law of financial statements or using the International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board. Every business prepares the statement of comprehensive income (profit and loss account) to ascertain the net result of the financial working of the business whether it has earned some income or profit or sustained any loss.        

Gautan (2005) sees financial statement as financial information which is the information relating to the financial position of any firm; when presented in a concise form. Besides the statement of comprehensive income and statement of financial position, some other statements are also prepared for deriving certain conclusions.

Financial statements are prepared either using the Generally Accepted Accounting Principles (GAAP) defined by the law of accounting and the law of financial statement or using International Financial Reporting Standard (IFRS) and the International Accounting Standard (IAS). Therefore, companies choose one of them for reporting purpose.

IFRS originated in the European Union after the First World War. IFRS are set of international accounting standard stating how particular types of transaction or event should be reported in the financial statement. IFRS are issued by international accounting standard board (IASB) and they specify how accountant must maintain their reports.                                                                          

IFRS was established to obtain a common accounting language so that businesses and accounts can understand from company to company and country to country. The main point was to maintain stability and transparency throughout the financial world. This allows individuals investor to make educated financial decisions because they can see clearly what has been happening with the institution which they wish to invest.                                                                           

IFRS spread globally to the European and African countries whereby companies were obliged to prepare financial statement base on IFRS. Since IFRS is globally accepted accounting standard of financial reporting, Cameroon financial institution follow this same standard in which CCC PLC Buea is not an exception.        

1.2 Statement of the problem

Every business prepares profit or loss account or income statement to ascertain the net result of the financial working of the business. Whether end some income or profit or sustained any loss. It also prepares a balance sheet to find out the financial position of the business.

Profit and loss account or the income statement retained earnings statement and balance sheet are known as the financial statement.

Gautam (2005) sees financial statement as financial information which is the information relating to a financial position of any firm when presented in a concise and capsule form.

Beside profit and loss account and balance sheet, some other statements are also prepared for deriving a certain conclusion.

In our current situation in society now, the investment decision making community credit company plc. [CCC], has been very slow due to the negligence on the use of financial statement and other important financial records. Most organizations are still ignorant of the benefit of the financial statement thereby limiting their knowledge about their financial position and above all their ability to use the financial statement to make the financial investment decision making.                         

It is for this reason that we search embarked on this study to draw the alarming signal on the impact of the financial statement on the investment decision in an organization.

Besides, most MFls complying with the bookkeeping principle, they have fallen short of living up to the laid down standard, but to satisfy the mandatory and statutory requirement. Subsequently, this has further raised the urgency to provide technical support and management training needs to the operators in this sector to cope with the ever-growing demand for new and existing players in the industry as a result of competition, creativity, innovation.

Many businesses have failed because of little consideration of accounting information in decision making. It is for this reason that the researcher embarked on, to investigate the role of accounting information on decision making in microfinance and looking at some of the information’s used by management in making a decision.

Despite the use of the financial statement in community Credit Company PLS [CCC], the institution is still unaware of the importance in the frequency and manner of presentation of this statement as far as an investment is concerned. Having in mind in the fact that financial viability is quite important, what therefore is the role of financial reporting n investment decision making in Micro Financial Institutions [MFI]?

1.3 Research questions

According to Uzoagulu (1998; 96), research questions guide the researcher in constructing the questionnaires. Therefore the researcher raises the following research question to guide her in constructing her questionnaire which are instruments in the study.

Financial statement includes profit and loss account, income statement and balance sheet along with certain schedules and statements.

The main research question is,

How do financial statements affect investment decisions in MFIs?

  1. To what extent is financial statements used in the investment decision making of a company?
  2. Is our financial statement useful for forecasting company performance?
  3. How many types of financial statements are there?
  4. What are the various tools used for the presentation of the financial statement and what is its importance to MFIs?

What recommendations could be made as far as this study is concerned?

1.4 Objectives of the study

This study will be of immense benefit to banks by improving the banking performance of financial analysts, investors, company and financial organization.

This is because the study intents to help this stockholder in decision making. The study will equally help in widening the knowledge about financial statements in investment decision making, it will also make the organization to appreciate the importance of sound financial statement in the provision of information necessary for decision making.

Again, this research will equally serve as a reference to students’ in this noble institution and to other schools that may be interested to embark on a further research study of this nature, and above all, a report of this study shall definitely add to existing knowledge in research methodology.

The main objectives of the research are:

  1. To know the extent to which financial statements are used in investment decision making of a company.
  2. To find out if financial statements are useful for forecasting a company’s performance.
  3. To know how many types of financial statements that exist.
  4. To know the various tools used for the presentation of financial statements and its importance to MFIs.

1.5 Research hypothesis

Hypothesis according to the oxford advanced learners dictionary is an idea or a suggestion that is based on unknown facts and is used as the basis for reasoning or further investigation.

According to Collins Cobuild English Learners Dictionary, the hypothesis is an idea which is suggested to a possible explanation for something which has not yet been proven to be correct.

This section talks about facts raised that needs to be verified or proved whether they are true or false. They are two types of hypothesis. They are stated in the null and alternative forms.

 

The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

The role of financial reporting on investment decision making in Microfinance Institutions(MFIs)

 

 

 

 

 

 

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