THE USEFULNESS OF FINANCIAL STATEMENTS IN ASSESSING THE PERFORMANCE OF COMPANIES AS GUIDE TO INVESTMENT DECISIONS

THE USEFULNESS OF FINANCIAL STATEMENTS IN ASSESSING THE PERFORMANCE OF COMPANIES AS GUIDE TO INVESTMENT DECISIONS

 

ABSTRACT

Corporate organizations owe a duty to fully disclose matters concerning their operations so as to aid investors in making investment decisions because investment decision makers rely on information obtained from financial statements to predict future rate of return. Without the financial statement, there will be a problem of how to determine the profit of a company, and evaluation of performance of a company. The general objective is to ascertain the use of financial statement in assessing the performance of companies and in guiding investment decisions. Survey research design was adopted in this study. The population of the study comprises of 25 staff. The study covered a period of five (5) years, 2007-2011. Secondary and primary sources of data were used in the study. The data were obtained from the Gabson Aluminum Company Limited financial annual reports. Statistical tables, charts and percentages were used to analyze the data. Chi-square (X2), simple percentage and ratio analysis were used to test the hypotheses at the alpha level of 5%. The results of the study discovered that financial statements are very relevant in assessing the performance of a company, and it also helps in guiding investment decisions. The study recommended that: there should be prompt provision of the financial statement at the end of each financial year; no investment decisions on a company should be taken without the consideration of a company`s financial statements.