A Critical Analysis on the Use of Financial Statements in Assessing the Performance of an Organization (a Case Study of Union Bank Mubi)
CHAPTER ONE
Objectives of the Study
Companies including those in the banking industry have had to face the onerous task of presenting a credible and generally acceptable financial statement in their annual reports, to the various people to whom they own such obligations. The purpose of the study is:
- To determine the various financial reports used by banks.
- To ascertain the problems of using financial reports to assess performance of banks.
- To determine if there’s a relationship between financial reporting and performance evaluation of a bank.
CHAPTER TWO
REVIEWED OF RELATED LITERATURE
Conceptual framework
The conceptual framework is intended to provide the interrelationship between and among different variables and highlight conceptual distinctions of previous research conducted in order to guide the flow of ideas in this study. The relevance of annual reports is largely attributed to its function of informing stakeholders about the financial health of his organisation, particularly its income and financial position According to (Aroh, Ndu & Aroh 2011). Conversely, financial statements of an organisation should depict information regarding the economic resources of a company, which are the streams of potential cash inflow. It should also fulfil its obligation of transferring economic resources to others which is the source of potential cash outflow from an organisation and its earnings which are the financial results of its operation. According to Meigs and Meigs (1993), financial statements are the principal means of reporting general-purpose financial information to users. The accounting data presented in the financial statements must be relevant and meaningful to the user (Omolehiwa, 2000). According to Drake (2010), analysis of financial statements is the selection and evaluation of financial data, along with other relevant data, to facilitate financial and investment decision-making. Analysis of financial statements helps in both long-term and short-term forecasting. Through financial performance analysis, growth of a company can be gauge growth rate of a company. The ability to understand financial statements is assessed based on the transparency and straightforwardness of the information in yearly reports. It must be Comparable, meaning that stakeholders and other users of financial information should be have enough clarity in order to be 19 able to distinguish similarities and contrast information among various statements. Financial statements must also be timely meaning that information should be assessable to the necessary authorities in an organisation so as to impact decisions before it loses its ability to do so. These are all prerequisite for financial related reports. corporate bodies are obligated to provide information about the financial performance, position and changes in their financial activities due to the relevance of the information to users making economic decisions.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain a critical Analysis on the use of financial statements in assessing the performance of an organization (A case study of union bank Mubi). In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the use of financial statements in assessing the performance of an organization
Summary
This study was on a critical Analysis on the use of financial statements in assessing the performance of an organization (A case study of union bank Mubi). Four objectives were raised which included: To determine the various financial reports used by banks, to ascertain the problems of using financial reports to assess performance of banks and to determine if there’s a relationship between financial reporting and performance evaluation of a bank. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from Union bank in Mubi. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
In conclusion, this study has shed light on the critical role of financial statements in assessing the performance of organizations, with a specific focus on Union Bank Mubi. Through a comprehensive analysis of various financial indicators, including liquidity ratios, profitability ratios, and solvency ratios, we have gained insights into the financial health and efficiency of the bank.
Recommendation
Based on the findings of this study on the critical analysis of financial statements in assessing the performance of Union Bank Mubi, several recommendations emerge to enhance the effectiveness of financial analysis and decision-making:
- Union Bank Mubi should strive to improve the transparency and disclosure in its financial reporting. This includes providing clear and detailed explanations of accounting policies, assumptions, and any significant judgments made in preparing the financial statements. Enhanced transparency fosters greater trust and confidence among stakeholders.
- Continuous training and capacity building programs should be implemented for staff involved in financial reporting and analysis. This ensures that they are equipped with the necessary skills and knowledge to prepare accurate and reliable financial statements and to conduct robust financial analysis.
- While financial ratios provide valuable insights, Union Bank Mubi should consider diversifying its performance metrics to include non-financial indicators such as customer satisfaction, employee engagement, and market share. This broader perspective provides a more comprehensive assessment of organizational performance.
- Regular benchmarking against industry peers and competitors can provide valuable insights into Union Bank Mubi’s relative performance and identify areas for improvement. This comparative analysis can help management set realistic targets and strategies to enhance competitiveness.
- Strong internal controls are essential to ensure the accuracy and integrity of financial reporting. Union Bank Mubi should continuously review and strengthen its internal control systems to mitigate the risk of errors, fraud, and misstatements in financial statements.
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