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Project Topic:

THE IMPORTANCE OF FINANCIAL STATEMENTS AS A GUIDE FOR MANAGEMENT DECISION MAKING

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 Format: MS WORD ::   Chapters: 1-5 ::   Pages: 80 ::   Attributes: Data Analysis,abstract, table of content, references ::   1,280 people found this useful

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CHAPTER ONE

1.0     Introduction

The uses of financial statements to interested group are the purpose for which accounts are prepared and presented to the management and the public. These activities of identifying, measuring and recording are meaningless unless the information is communicated to interested users. The information is communicated through the preparation and distribution of accounting reports, the most common which are called financial statements.

To make the reported financial information meaningful, accountants describe and report the recorded data in a standardized manner. Accountants report financial information on a periodic basis that is at regular intervals. The frequency of communicating varies according to the needs of the intended user of the data and nature of the information reported. For example, the company’s treasurer may request daily reports of cash, the sales manager may require weekly reports of sales and the managing director may desire monthly reports of operations as a whole.

The financial statements are the means of conveying to management and other interested users a concise picture of the profitability and financial position of the business, and therefore aid decision makers (management) to plan and control the activities of the business.

Four major financial statements are used to communicate the required accounting information about a business; these include, profit and loss account, the statement of owner’s equity, the balance sheet and the statement of cash flows.

1.1     Background of the Study

Public companies are required by law to prepare financial statements and these financial statements are used by management and variety of groups. Some of the questions asked by users of financial statements about a company are stated below: for example internal users, the mangers of a company might ask:

  • Is cash sufficient to pay out debts?
  • Are customers paying their bills promptly?
  • What is the cost of manufacturing each unit of product?
  • What cost exceed budget?
  • Which product line is the most profitable?
  • How much money must be borrowed to expand the factory?

To assist management in answering these questions, accounting provides internal reports.

1.2     Statement of the Problems

Basically, accounting is the process by which the profitability and solvency of banks and companies can be measured. The problems of this study include:

How do bank statements use the financial statements to know whether the bank is solvent or insolvent and whether it would probably be solvent? Stated simply, management is faced with alternatives and decisions to be made, depends on the validity of information from the accounts, about he alternatives and their consequences.

1.3     Objectives of the Study

The objectives of this research work is to determine how financial statements provide guidance for performance evaluation to management and other interested parties in the banking industry and to offer recommendations to the bank in areas where loopholes are identified.

In addition, some of the objectives of this research work are hereby stated below:

  1. To examine the financial statements of guarantee trust bank plc, to show its profitability and assess its performance over the relevant years.
  2. To determine whether the management of Guaranty Trust Bank Plc, has been efficient in carrying out its duties, and whether it effectively utilized the resources at its disposal.
  3. To study other people work on the topic, compare the data collected to determine any modification.
  4. To give more light on the usefulness of financial statements to the company in question (i.e. Guaranty Trust Bank Plc).

1.4     Research Hypothesis

The Null Hypothesis:

H0:    The financial statements of Guaranty Trust Bank Plc do not serve as a    guide for management decision making.

The alternative Hypothesis:

H1:    The financial statements of Guaranty Trust Bank Plc serve as a guide for management decision making.

 

 

1.5     Significance of the Study

The study is to assist the management of Guaranty Trust Bank Plc in using financial statements which will assist in solving problems of liquidity and insolvency experienced by banks now in distress; and about how it has discharged its stewardship responsibility to owners for the user of the bank resources entrusted to it.

By carrying out this research work the researcher hopes that this work will be important and useful, not only to the management but also to the external users of financial statements Guarantee Trust Bank Plc.

The project when competed will serve as a reference point to researcher who would want to research further on the importance of financial statements as a guide for management decision making. Other beneficiaries include students of accounting, banking, finance, insurance, marketing management etc.

1.6     Scope of the Study

In carrying out this research work, the researcher has decided to limit the scope of this study to the financial statements of Guaranty Trust Bank Plc, and text books that proved very helpful in the course of this research.

 

1.7     Historical Background of the Case Study  

Guaranty Trust Bank Plc, commences operation in February 1991 and was quoted on the Nigerian Stock Exchange in 1996 winning the exchange’s president merit award that same year and again in 2000, 2003, 2005, and 2006. And raised over N 11 billion from Nigerian investors to expand its operations.

On 26 July, 2007 the bank was, as very first sub-Saharan bank and first Nigerian joint stock company, listed on London Stock Exchange and Deutch Borse. The IPO raised US $ 750,000,000. In the same year, they successfully placed Nigeria’s first private Eurobond issue on the international capital markets.

The GT Bank USD 500,000.000 Eurobond was the first ever Benchmark Eurobond issue by a Nigerian corporate and the second Eurobond programme by GT Bank in the last 5 years.

They introduced online banking and SMS baking in Nigeria and a naira cards and with GTB-on-wheels, mobile branches.

On 12 March 2008, GT Bank was given a banking license for the United Kingdom by the Financial Services Authority.

GT Bank is a partner of Eko Altlantic City a new made Island (820 ha.) in the Atlantic ocean, adjacent to Victoria Island Lagos. It will be the home of the new financial district. The building of Eko Atlantic City started in 2009 and is expected to be finished in 2016.

To commemorate the bank’s 20th anniversary, the Nigeria postal service issued a set of postage stamps. This was the first time in Nigeria that a corporate organization was honoured in such a way.

In 2013, the bank issued a USD 400,000,000 Eurobond at a coupon rate of 6%; the least obtained by Nigerian company in the international capital market. The Eurobond was issued under the USD 2,000,000 Global Medium Term Note programme, which is registered under both regulation in the United State of America and Rule 144A in the United Kingdom and sold to investors across African, America, Asia and Europe.

Latest financial results: the bank’s financial results for the year 2013/2014 financial year ended February 28, show a revenue of N 242.7 billion, operating income N 189.5 billion, Net income N 90.00 billion, Total Assets N 2,102.8 trillion, Total equity N 332.4 billion. Number of employees over 10,000 (2014), and the bank has 240 branches in Nigeria and more than 291 ATMs.

1.8     Definition of Terms 

Financial statements: Is the annual statement summarizing company activities over the financial year. They consist of the profit and loss account, balance sheet, statement of cash flows are a central feature of accounting because they are the primary means of communicating important accounting information to users.

The profit and loss account: Is a financial statement that summarizes the amount of revenues earned and expenses incurred by a business over a period of time.

The statement of owner’s equity: It shows the charge in the owner’s capitals account over a period of time.

The balance sheet: Is a financial statement that shows the financial position of a business on a certain date.

The statement of cash flows: Is used to show the cash produced by operating the business as well as important investing and financing transactions that take place during an accounting period.

Fixed assets: These are assets acquired for production purpose and not for resale. They are also used in the business permanently until they become obsoletes.

Current assets: These are assets bought in order that they may pass through the normal trading circle and resale for cash. They are also called circulating or floating assets e.g. stocks, debtors, cash balances etc.

Working capital: This is surplus of current assets over current liabilities. In other words, it is the capital available for conducting the day-to-day operations of an organization represented by its net current assets.

Debtors: These are people who owe a company.

Creditors: Are those whom the company owes.

Capital: This is the amount invested by the owners or shareholders

Intangible assets: These are assets such as goodwill, trademark, and discount on shares etc. in other words, these are assets that we can neither see nor touch but they only exist in their name.

Revenue reserves: These are profits earned over the years which are not distributed to shareholders ad dividend.

 

 


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Paper Information

Format:ms word
Chapter:1-5
Pages:80
Attribute:Data Analysis,abstract, table of content, references
Price:₦3,000
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