Analysis Of Financial Reporting As A Source Of Information

Introduction

1.1 Background of the Study

An accounting report consist of items that are contained in the annual report of a company. These reports are also termed "financial statement" these reports are necessary and compulsory in any business organizations and they show the true and firm position of such company at a given period of time. They are usually on annual basis and they provide information to the user of the report to give an informed judgment about a company. These analysis of financial report include:

The profit and loss account which shows the profit for a year before and after take and a profit to be retained

The balance sheet which shows the statement of asset and liabilities

Statement of sources and application of funds

Auditor"s report

Director"s report

A value added statement

The management cannot only direct the affairs of the company but also by the shareholders. And in order to measure the performance of a business entity, the management need this accounting report.

Statement can be prepared to indicate either the historical result of these transactions or the financial conclusion of the business and interpreting the result therefore to the interested parties"

Public company as it will be used throughout this study refers to as public limited liabilities whose shares are quoted in the stock exchange market, various groups such as owners, creditors, managers, government agencies, employees etc. are interested in the ability of the company to pay its debt as at when due and to earn a reasonable amount of income. These ideal concepts or objectives of a company are referred to as factors of solvency and profitability. A company which fails to meet the standard expected of it by its creditors in a timely basis is likely to experience difficulties in obtaining credit which eventually lead to deadline in its profitability. Similarly, a company whose earning is lower than those of its competitors is likely to beat a disadvantage in obtaining new capital from stock holders. Therefore, accounting reports are of great importance to any company.

1.2 Statement of the Problem

This study is specifically undertaken to examine the contributions and usefulness of various accounting reports to a public company. It should be noted that information provided by the various accounting report sometimes might not be accurate thereby causing a set back in it ability to give an informed judgment to it hence the interpretation to this accounting reports in other to show the liquidity position of a company and how solvent it is therefore, it shall examine.

Whether accounting reports are eventually useful to public company

Whether the user can actually give various interpretations to eat and deduce and informed judgment from it.

Whether the information provided is constant

Whether the tools used in analysis actually give good result

1.3 Purpose of the Study

In the early history, it is popularly believed that the primary purpose of financial reporting was to detect errors, but with the development of the new intellect about the primary objective financial statement or reporting. The purpose is to give report which includes the following:

(a) The Appraisal of Past Performance:

The decision maker will access the success of the business and the effectiveness of the management by looking at the information such as sale volume cash flow.

(b) Prediction of Future Potentials:

This involves the provision of information which will provide effective decision making by the future of an enterprise and suggest the necessary solution for the firm or enterprises to respond to any future economic changes or development.

(c) Evaluation of Present Condition:

The decision makers will require information such as asset owned by the enterprises; equity ratio etc. in general, financial statements are prepared for the purpose of presenting a periodical report of progress made by the management. The financial statement and their adherence to general accepted accounting principles and conventions.

1.4 Significance of the Study

The financial procedure is very significant in as much as its attempt to achieve these objectives.

To provide other needed information about changes in economic obligations

To provide reliable information about changes in non-resources of an enterprise that result from profit oriented activities.

Its objectives are to provide reliable financial information and economic resources and obligation of business enterprises

It provides financial information that assist in estimating the earning potentials of the enterprises

To assist management in decision making from the above significance of financial statements, it can be deduce from that it has three main significances.

From the above significance of financial statements, it can be deduced from that it has three main significance.

To ensure that directors properly managed the asset of the company (steward functions)

To know the present financial position of the company

To know the future prospect of the company, it ability to employ, pay dividend and to repay loan.

1.5 Research Aim and Objective

In order to give this research work some degree of validity, the following questions were formulated.

To establish whether the procedure can reduce the degree of errors

To investigate the usefulness of financial reporting as a means of information in an organization

To ascertain the practice of standard an means of information

To establish whether the introduction of financial reporting aids to detect all kinds of fraud in the financial statement of an organization

Finally to find out the standard and importance of financial reporting

1.6 Scope of the Study

The focal point this study is to examine the various accounting reports kept by public companies such as Guinness Nigeria plc, enlightens the usefulness of these accounting reports and their characteristics. This scope of the study is strictly to its Lagos office due to the fact that they keep the same accounting records.

Chapter one this research deals with the statement of the problem, purpose of the study, significance of the study, research questions, scope of the study and definition of terms.

Chapter two will show the literature review constituents of financial reporting, parties interested in financial statement, ratio and types of ratio, significance of ratio and limitation of ratio analysis.

Chapter three deals with research methodology, research instrument and techniques, brief historical background of the case study, method of interpretation, research design and procedure, selection population sample, questionnaire design and assumption, conducts of the field works, problems encountered and procedures of data analysis.

Chapter four will show the presentation and analysis of data application financial ratio analysis findings and writer predation of data.

Chapter five deals with summary, conclusion and recommendation of this research.

1.7 Definition of Terms

In this study, various definitions will be used in order to give a true knowledge of the research work. These terms are analysis below:

(a) Expenses:

This is the cost which has been paid or to be paid for the resources used in the accounting period

(b) Revenue:

This is often referred to as income or money received ot to be received in respect of ordinary business transaction or in respect of other expenses uses of assets

(c) Balance Sheet:

This is a statement which shows the true financial position of the business entry in given period

(d) Dividend:

This is referred to as the contribution paid to the shareholders as benefit of a business. It is stated as a specific amount per share of capital stock.

(e) Financial Statement:

This is an accounting reports, which summarizes the financial position and operating result of a company.

(f) Owner"s Equity:

This is the amount of owner"s investment, which has been retained in the business.

5.0 Summary of Finding, Conclusion and Recommendation

Having gone through this research work, one would believe that a financial report is the back bone of a public company and necessary in any public company, the reason being that it show the resent financial position of a company and its future prospect.

The financial report gives the owners of the business (i.e. shareholders) an opportunity to see at a glance how the management has been doing with their company. It also aids the management in making or taking a stand on financial decision affecting the company

5.1 Summary

Accounting report are the panel of business enterprises that constitute a report on managerial performance, attesting to management success or failure or flashing warning signals of impacting difficulties.

This research study deals with the definition of financial public company and other relevant terms. It is also based on the review of available literature on use and users. It also deals with the role of profitability and solvency in any financial information for decision making.

This study also provides a number of different groups that are interested in the financial affair of the business either for protection sake or as an aid in decision making. Examples are bank management, creditors, investors, customers, and so on. Each of these groups has needs and accordingly each tends to concentrate on particular aspect of the company financial picture. This study also explains the computation and uses of ratios that are widely what each ratio attempt to measure.

5.2 Conclusion

The interpretation of published account is not or can not be an exact sense finance reports used to communicate useful financial information statement on purpose but careful analysis and interpretation made by the users of financial statement which often clarify and add to their usefulness and communication. It is the available techniques for analysis financial statement.

Ration should be used with caution and if inter-company or inter-period compares are to be made. However, at this junction, it is deemed that this study has achieved is objectives despites the little information provides in the data in which study based its research on.

5.3 Recommendation

After due consideration and analysis, these recommendations are hereby suggested although company must maintain sufficient stock questions to meet demand for trading, it is however, advised to keep amount invested in the need of two business reduce solvency and typing up funds.

Excess stock can also cause increase in the amount of storage and other related expenses further fund to be used better advantages. Debtor account yield hence, it is describe to be the amount invested in them at minimum level. Therefore, enough cash will be available to improve solvency, to purchase adequate materials for a lower prices and to pay dividends for shareholder

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