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Each person like every business requires some measures of both financial
position and financial performance in assessing his financial conditions. The
financial position depicts one’s wealth at ascertain point in time while one’s
financial performance describes once.
Financial statements according to Illoumezie (2006:33) are like
compasses “which navigators use to locate their bearing and find direction”.
People use them to gauge their financial positions at various points in their lives
in order to judge their progress towards their financial goals.
Financial statements according to meigs and meigs (1981:28) refers to
reports which summarize the financial position and operating results of a
business (balance sheet and income statements). It referred to as genera purpose
that satisfy the need of many groups generally called stakeholders. These groups
are particularly concerned with the risk inherent in and returns provided by their
investments, and who require accounting information to enable their assess the
ability whether they should buy, hold and sell their investments.
According to Anayaogu (2002:14) financial accounting provides
information to eternal decision makes such as shareholders government,
creditors, employees etc, these are people with whom or from whom money is
ultimately paid or received. Anayaogu (2002:20) also states that records of
financial accounting includes various ledges accounts, profits and loss accounts,
balance sheet and other financial records. These records are intended to show
the strength, progress, portability, management effectiveness and stewardship.
Financial statement are the means of communicating to interested
partners information or the resource, obligation and performance of the
reporting enterprise in a simple, clear and understandable form to all its user
with such attributer of relevance to decision reliability, consistency and
comparability materiality efficiency and understandability.
According to information provides continuity in history as quality in
monetary terms of economic activities resources and obligations of a business
enterprises as well as the various activity that cause a change in the level of
these resources and obligation. It is also serves as parameter for evaluating the
performance of a business enterprise and as a measuring tool to both the
management and decision markers and possible sale of shares by shareholder
when actual results deviate from the target objectives. The importance attached
to accounting information cannot only be related to management and the
government but it also cuts across the cars of the various categories of creditors,
employee, and other water cooperate bodies and potentials investors as well.
The annual report and accounts are said to be published owing to the fact.
It is being printed and dispatched to each shareholder and any other unfrosted
where person on request. The annual reports and accounts are the primary
means of communicating vital economic information in the cooperation’s
resources and obligation to absentee owners and could be investor by the
management. The published financial statement serve as a means of conveying
business information to the equity investor groups (shareholders), the loans
creditors group, the employee groups, the business contract group, the
government and its agencies as well as the general public. It gives a concise and
genuine picture of an enterprise profitability trend and its financial position. The
information contained in the published financial statement act as a basis for
which shareholder maker investment decisions.
However, the account days of pre-colonial administration, the preparation
and publication of financial reports used by owner managers for internal control
and cost determination. This inter became. Inadequate role to increase
completely of business organization. At the onset of industrial revolution, trade
begins to increase and expand. This necessitated employing managers to
manage the business on behalf of the shareholders. Managers positions now
necessitated companies to prepare and publish a financial report that would
reveal to the owners (shareholders) the operational state and financial position
of the company and how the capital contributed by the shareholder had been
utilized in the realization of the set out objectives of the company.
The company Act 1963 outline that every registered business
organization should maintain and submit audited financial statements every year
during the annual general meeting (agm) where. It is laid to the members. This
is in consonance with the provision of schedule two of the companies and allied
matter decree of 1990 which states internally that the form and contents of
published financial statements and with the accounting standard issued from
time to time by the Nigeria Accounting Standard Board (NASB).
Meigs & Meigs (1981: 14) states that the preparation of financial
statement is not the first step in the accounting financial statement is not the first
step in accounting process. At the close of financial period, the stakeholders
such as investors of a company naturally desires to ascertain the following:
(a) The result of the company’s operations for the period.
(b) The resources and hostilities of the company over the period in question.
(c) Wealth created by the company and how it has been distributed.
(d) Financial resources acquired and how they have been a expanded.
Thus, published financial statement prepared under companies and allied
matter decree (CAMA) 1990 supplies information about the above. As a matter
of fact, shareholders of any corporation would require annual corporate report
published about the entity and which must be relevant, sufficient and reliable.
The corporate report published in 1994 by a working paper setup by
Accounting Standard Committee (ASC) to be reexamined the scope and aims of
published financial reports identified seven user groups to include:
1) The equity – investors group
2) The analysis – advisory group
3) The employee group
4) The creditors
5) The business contact group
6) The government and its agential
7) The public
Bell (1998) identified (15) fifteen information needs of users of financial
statements, which art concisely summarized here as the financial need of
shareholders in the published financial statement of any business entity. These
includes information for
(a) Evaluating the performance of the entity.
(b) Assessing the objectives established previously by its management
members or owners.
(c) Evaluating managerial performance, efficiency and objectives including
employment, investment and profit distribution plans.
(d) Assessing the liquidity of the entity.
(e) Assessing the economic stability and inevitability of the reporting entity.
(f) Assessing the capacity of the entity to make future realer nation of its
resource for either economic or social purposes or for both.
(g) Estimating the future prospects of the entity which respect to dividend
payment remuneration and other cash outflows and predicating future
levels of investment, production and employment.
(h) Predicting, compressing and evaluating potential cash flow
Guinness Nigeria is a Nigerian Brewery founded in 1962. It engages in
brewery, packaging and marketing of spirits, wines and beer in Nigeria. It offers
its products under Guinness Foreign Extra Stout (1962) Guinness Extra Smooth
(2003) Malta Guinness (1990) Harp Lager Beer (1974) Gordon’s Spark (2001)
Smirnoff Ice (2006) and Satzenbrau (2006).
The company was incorporated in 1950 and it’s headquartered at 24 Oba
Akra Avenue Ikeja industrial estate, Ikeja Lagos Nigeria. Guinness and
unlevered are the main shareholders, although some of the shares are locally
owned. Guinness Nigeria plc is a company that believes in enriching its
community. This it has achieved by embarking on laudable corporate social
responsibility projects in several communities. In Nigeria these projects are
water of life initiative, which currently provides potable water of over 500,000
Nigerians spread across several rural communities from Northern to Southern
The company was listed in exchange market in the year 1965, with its
managers/ directors. Engr. (Chief) R.A. Alabi, OON (Chairman) Mr. N.
Blazquez (vice chairman) Mark R.M. Taylor (MD/CEO) and B.A. savage
(OMD) of Guinness Nigeria Plc, and so many other staffs.
The company’s registrars is union registrars limited 2, Burma Road
Apapa Lagos. And there end of accounting year is every 30th June of every year
as the case maybe. The company has four branches in Nigeria so far, they have
been to grow their turnover at average ratio of 20.7% per year over past five
years and they are currently on track to overtake their turnover for the 2011 full
year. Based on this result the return on equity improved from 0.17 to 0.31, this
leads to an estimated full year return on equity of 0.60. They have a current ratio
of 1.56 and a quick ratio of 0.98.
Virtually, every economic entity maintains its records on a historical cost
basis. The historical cost figures alone are inadequate. This is because net profit
is over stated, the balance sheet does not reflect the current worth of the
enterprises and inflationary situation, and the charging of the historical cost of
operations to profit and loss account may endanger the maintenance of the
operating capital of the entity. It is obvious that the current situation of
published financial statement has some limitations. This is because the result of
operation (net profit) is a function of accounting standards, policies and
conventions adopted by a company and used in the preparation of the financial
The financial statement should provide accurate financial information;
which shareholders can effectively manipulate to get the best out of their
investment. It is pertinent to say that analysis and interpretation of any financial
statement will descend on the adequacy and accuracy of the said statement and
how the financial information is being disclosed so as to enable to shareholder
make major investment decision such as “if to hold their shares or sell them and
invest in bond other than equity”. If they are to buy more share of the same
firm, but the problems statements.
i) Some shareholders cannot interpret financial information correctly and
cannot be able to make good use of the financial information disclosed to
get the best out of their investment.
ii) Company’s concepts, conventions and principles are not capable of
meeting the user needs.
iii) Published financial statements do not induce more people to make
investment in some companies.
iv) Some shareholders are not oriented before making investment decision.
v) Sometimes the dividend are not satisfactory considering the risk involved
in investment.
vi) Some financial statement sometimes guide the investors.
vii) Some financial statement prepared are window dressing.
viii) Some company’s find it difficult to make their financial statement
available to the shareholder at any point in time.
This research was undertaken to find a better solution to the research
problem(s) already existing in this area of study. It is therefore imperative to
establish some guiding steps and principles in decision making process which
will ensure that a given objective is not defeated and to find out if the financial
information that emanate from the published finance statements makes any
meaning to investing public.
a) To know whether the information in the financial reports of companies and
other financial information areas are understood and used for investment
decision making.
b) To ascertain the extent the company’s concept, convention and principles are
capable of meeting users/ investors needs.
c) It is deemed to state categorically and in clear terms that the influence of
corporate reporting to investment differences in accounting methods and
how financial statement deficiency affects the investors (shareholders).
d) To ascertain the extent published financial statement induced more people to
invest in companies.
Bragging into consideration the complexity of making financial decision
and the immediate problems which necessitated this researcher study, the work
seeks or intends to provide answers to the following questions posed.
1) Do investors understand financial statement very well?
2) What do they (investors) see as the importance of published financial
statement of companies?
3) Do the companies publish the market value of shares and dividend of the
company to the shareholders?
4) To what extent do companies concepts, conventions and principles capable
of meeting users need?
5) To what extent do the financial statement of a company encourage investors
to invest?
6) What is the best source of information to the shareholder on investment
7) Do the shareholders carryout analysis to the appropriate personnel?
Hypothesis One
Ho: Most investor does not analyze financial report before making an
investment decision.
Ho: Most investor does analyze financial report before making an investment
Hypothesis Two
Ho: Financial statement does not show true and fair view of the statement in
your company.
Ho: Financial statement show true and fair view of the statement in your
This research work is expected to be of great importance to investors and
shareholders in particular. It will serve them as a guide to individuals who are
interested to acquire shares in any firm, company or business organization. It is
expected to serve also as an indispensable tool for current and potential
investors of business organization as well as companies in their investment
decision making by way of providing sound investment strategies for
shareholders and other users of published financial statement.
This research work covers all the relevant accounting information that
was needed by investors/ shareholders of Guinness Nigeria Plc and their
investment states of Guinness Nigeria Plc using its published annual report and
financial statements between 2004-2003. The goal behind every investment is
either return, capital appreciation, therefore the general goal of any investment
decision that is obtainable in our business enterprise can be related to another.
There is no research/ study that is hitch free, during the course of this
study, some of the constraint failed and those envisage making this task all the
more daunting are;
1) Financial constraints
2) Lack of co-operation among staffs
3) Limited time
DIVIDEND: Is the distribution of part of the earnings of a company to its
shareholders. The dividend is normally expressed as an amount per share on the
par value of the share.
DILUTION OF EARNINGS: This is when additional shares of stock are sold
without an immediate increase in income. This result is a decline in earnings per
share until earning can be generated from funds raised.
EARNING PER SHARE: Is the amount of profit after tax and preference
dividend (but before taking accounting of extra-ordinary income and expenses
attributable to each ordinary share in issue and ranking for dividend during the
FINANCIAL INFORMATION: This is any information dealing with the
operation of company and how the fund acquired.
EFFICIENCY: This refers to achievement of organization goals within
minimum waste of resources that is best possible use of resources.
FINANCIAL STATEMENT: This is a periodic financial reports accounts and
other related documents that highlights the financial position of an enterprise as
well as the financial profitability.
INVESTMENT: This is the commitment and utilization of funds and other
scare resources in a project with the expectation, that the utilization will
generate return.
ORDINARY SHARES: These are the common stock of a company which is to
be issued out for sale to individual public.
PROFITABILITY: Profitability refers to the relationship between profit and
the resources employed in earning it. Its resultant effect is usually expressed as
a percentage.


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