THE IMPACT OF FINANCIAL STATEMENT IN INVESTMENT DECISION

ABSTRACT

This study set out to study the Impact of Financial Statement on Investment Decision. (A case study of Cement Company of Northern Nigeria Sokoto).

Financial statement provide the base statement its investment decision it is therefore critical that it should provide a reliable permanent history of the financial activities of organization record in archeological diary of measured event presented in orderly and systematically manner.

It readily communicate primarily financial information in nature investors and other practice who make effective use of the information for an investment decision posited by (Onukwu 1998) in regard to financial liquidity, profitability and ability of an entity, is an indication that these information posited to be presented in publications are the balance sheet, profit and loss account and cash flow statements in which case presented in an accounting manner and ethics.

Financial statement in accounting formation is an information needed by varieties of uses classified into internal and external users as posited by American Institute of Chartered Public Accounting (AICPA) is an evident which reveal the relative importance of such information to government present and potential direct financial interest as posited to ‘Peter” indicated the statement report shall use all disclosure, materiality, consistency, conservation, and formation according to Paul (1968).

Guiding the financial statement analysis instituting comparativeness is the legal frame work defining its requirement disclosure to the consumption of its users.

CHAPTER ONE

1.1       BACKGROUND OF THE STUDY

Corporate organizations owe a duty to fully disclose matters concerning their operations so as to aid investors in making investment decisions. Both large and small organizations in addition to satisfying the legislating requirement tend. to retain existing investors and to attract potential ones through the publication of their financial statements where the capital stock of a corporation is widely held and its affairs are of interest to general public. The discussions and illustrations of the study will be centered on the financial statement presented to shareholders and also available for potential investors, bond holders and trade creditors as a tool of information for investment decision. Financial statement based on result on past activities are analyzed and interpreted as a basis for predicting future rate of returns and assessment of risk.

Financial statement provides important information for a wide variety of decision, investors draw information from the statement of the firm in whose security they contemplate investing. Decision makers who contemplate acquiring total or partial ownership of an enterprise expect to secure returns on their investment such as dividends and increase in the value of their investment [capital gain]. Both dividends and increase in the value of shares of company depends on the future profitability of the enterprise. So investors are interested in future profitability. Past income (dividend) data are used to forecast returns for future investment and increase in share prices.