REPUBLIC OF CAMEROON REPUBLIQUE DU CAMEROUN

Peace – Work – Fatherland Paix – Travail – Patrie

******* *******
MINISTRY OF HIGHER EDUCATION MINISTÈRE DE
L'ENSEIGNEMENT SUPÉRIEUR

*******

*******

SIANTOU UNIVERSITY INSTITUTE

SCOOPS-DA FINANCE

A Report Presented in Partial Fulfillment of the Requirements for the Award of the
Higher National Diploma (HND) in Accountancy.
Carried out from the 25thJune to the 24th August 2019

Department: Accountancy

Written and Presented by:

JEUFO MADIO ICHA BRENDA
Academic Supervisor
Mr. ARREY MARINUS ARREY (MSc) in Mathematic Economics and
Econometrics
Professional Supervisor
 Mr MPOUASSI Ulrich
Branche Manaager

Academic Year 2019 - 2020

DECLARATION

JEUFO MADIO ICHA BRENDA declare that this research work titled “Impact of
Financial Statement in the Investment Decision Making of Microfinance, case of
SCOOPS-DA branch at Lycee Biyem-assi” is my work and carried out for the fulfillment
of the award of a Higher National Diploma(HND) in the department of accountancy. All
borrowed ideas have been acknowledged by means of quotations and references.

Name: JEUFO MADIO ICHA BRENDA

Date…………………………………………
signature…………………………………..
 CERTIFICATION

This is to certify that this piece of work titled “Impact of financial statement in the
investment decision making of microfinance case of SCOOPS-DA Yaoundé branch
Lycee Biyem-assi” is done by JEUFO MADIO ICHA BRENDA and meets the partial
requirement for the award of a Higher National Diploma in Accountancy.

Academic supervisor
Mr. ARREY MARINUS ARREY
Signature .......………………………………….. Date
………………………………………
Field supervisor
Mr. MPOUASSI ULRICH
Signature…………………………………………… Date
………………………………………..
President of the jury
……………………………………………………………………………….
Signature .......………………………………….. Date
………………………………………
Member of the jury
Signature……………………………………………..Date……………………………………
……
Member of the jury
Signature
……………………………………………..Date………………………………………
Examiner
………………………………………………………………………………………….
Signature .......………………………………….. Date
………………………………………
 DEDICATION

To my lovely parents MR JEUFO JEAN MARIE AND MRS KOUEDJIN ANTOINETTE .

And to all the JEUFO's FAMILLY

ACKNOWLEDGEMENTS
 MY profound gratitude goes to my supervisor Mr. ARREY MARINUS
ARREY for his willingness and intellectual stimulation in reading, editing and
supervising this piece of work.

I am particularly thankful to the manager of SCOOPS-DA Mr.

MPOUASSI ULRICH who was my internship supervisor and the entire staff of
SCOOPS-DA for putting aside basic commitments to let me through their
various departments to provide me adequate data as required.

Finally my thanks go to my lovely friends in the Acounting department

and the MENDONG Team who was of great help with their machines and
ideas. Also to my classmates and friends, and all the rest not stated who present
for me when the researcher needed most and contributed directly or indirectly
for the success of this work.

ABSTRACT
 The purpose of this study is to assess the Impact of Financial Statements
in Investment Decisions case of SCOOPS-DA Yaoundé .This study has as main
objective, to know the effects of financial statements analyze on investment
decision, with the following specific objectives to know the impact of income
statement analyze on investment decision, to know the impact of balance sheet
analyze on investment decision, to know the impact of cash flows analyze on
investment decisions. This led to the following main research questions ; what
is the impact of financial statements on investment decisions, with the specific
objective: what is the impact of income statement on investment decisions, what
is the impact of balance sheet analyze on investment decision, what is the
impact of cash flows analyze on investment decisions. This theme originates
from the main problem discovered in the organization, it appears that the
financial statement is always drawn weekly, or at the end of each month. It also
appears that the positive impact of financial statements helps the accountant to
his investment decision and management each year.
The target population was 30 respondents. During this internship,
research work, questionnaire; interviews and sampling methods were used to
collect data. Data was analyzed using frequency tables, pie charts, as well as
tables. The findings revealed that most of the respondents agree that financial
statements affect investment decisions of micro finance institutions while just a
few disagree on this point and most organizations do not use financial
statements to make investment decisions. Lastly, the researcher of this piece of
work will recommend users of this work, to extend and expand their scope of
study into other regions of the country.
 LIST OF ABBREVIATIONS

ARR : Accounting Rate of Return

IAS : International Accounting Standard
IFRS : International Financial Reporting Standards
IRR : Internal Rate of Returns
MFI’s : Micro finance Institutions
NPV : Net Present Value
PBP : Pay Back Period
PI : Profitability Index
SCOOPS-DA : Société Coopérative Simplifiée Des Affaires

LIST OF TABLES

Table 1:The vertical presentation of a balance sheet..............................................17

Table 2 : The name of the enterprise......................................................................18
Table 3: Gender of respondents...............................................................................49
Table 4: Distribution of sample according to age of respondents...........................50
Table 5: Distribution of sample according to marital status of respondents...........51
Table 6: Distribution of sample according to position held of respondent.............52
Table 7: Distribution of sample according to longevity in service of respondents
.................................................................................................................................53
Table 8: Financial Statements influence investment decisions...............................54
Table 9: Your Company prepares income statement and balance sheet monthly
.................................................................................................................................55
Table 10: Your Company keeps accounting recordings as well as financial
statements................................................................................................................56
Table 11: Your Company prepares cash flows monthly.........................................57
Table 12: Financial statement minimized the cost of recording and interpretation
of data......................................................................................................................58
Table 13: Financial statement contributes in the quality control............................59

LIST OF FIGURES

Figure 1 : Conceptual diagram................................................................................15

Figure 2: Distribution of sample according to sex..................................................49
Figure 3: Distribution of sample according to age of respondents..........................50
Figure 4: Distribution of sample according to married status of respondents.........51
Figure 5: Distribution of sample according to the position held of respondent......52
Figure 6: Distribution of sample according to longevity in service of
respondents..............................................................................................................53
Figure 7: Financial statements influence investment decisions..............................54
Figure 8: Your Company prepares income statement and balance sheet monthly
.................................................................................................................................55
Figure 9: Your Company keeps accounting recordings as well as financial
statements................................................................................................................56
Figure 10: Your company prepares cash flows monthly.........................................57
Figure 11: Financial statement minimized the cost of recording and
interpretation of data...............................................................................................58
Figure 12: Financial statement contributes in the quality control...........................59

CHAPTER ONE
INTRODUCTION

This chapter talks about background to the study, conceptual background,

theoretical background, problem statement research objectives, research
questions, significance, justification and scope of study.

• BACKGROUND TO THE STUDY

Introduction
 The background to the study is made up of the historical background, the
conceptual background and the theoretical background.
The historical background is made up of two keys, that is the historical
background of the dependent variable and the historical background of the
independent variable

• Historical background of financial statement

According to SUH COLLINS (2015), A Financial statement refers to a
summary explaining the financial position or business performance of a
business during a certain period. A company is required to prepare a full set of
financial statements that conform to regulatory guidelines and should be
accurate. A full set of financial reports include, income statement, statement of
retained earnings, cash flows and the statement of financial position (Balance
sheet). Presenting a financial statement clearly helps the companies to interpret
results and thus plan for a more profitable future.
Growth in a business refers to a company expanding its business using its
own resources and assets. Financial statement preparations in a company are
always done by internal accountants, who are directly influenced by the
management of the company. Companies make certain decision based on
information from financial statement, thus a fraudulent financial statement
implies a risk possibility which can cause a wrong investment decision making
in an organization. Financial statements of companies are prepared either using
the international accounting standard (IAS) or the international financial
reporting standards (IFRS) Investment decision is the determination made by
directors as to when and how much capital be spent on an investment
opportunity. The decision always follows research on financial statements.

• Historical background of SCOOPS-DA

 According to the archives of SCOOPS-DA (2012), like most African
states in general, Cameroon's economic environment is characterized by an
increase in activities in the informal sector; this increase led to the emergence of
microfinance institutions. Said outbreak enabled the SCOOPS DA according to
the agreement MINFI NO 06/250 / CF OF 16 January 2012 AND THE
DECISION OF COBAC NO-D-2012/31, In accordance with the law 92/006
and relating to the cooperatives of savings and credit regulating the micro
finance sector in Cameroon to see the day. Its registered capital is 250,000,000
FCFA, its General Management is in Yaoundé at the Central Market (SHO),
and has several agencies in the national territory such as: NKOLDONGO;
MIMBOMAN; BIYEM-ASSI, DOUALA and very soon BAFOUSSAM.

• Historical background of microfinance institutions

According to APOMO Juliette Vanessa (2019) the history of

microfinance can be traced back as long to the middle of the 1800s when the
theorist Lysander Spooner was writing over the benefits from small credits to
entrepreneurs and farmers as a way of getting the people out of poverty. But it
was at the end of the world war II with the Marshall plan the concept had a big
impact.
The today use of the expression micro financing has its roots in the 1970s
when organizations, such as Grameon bank of Bangladesh with the
microfinance pioneer Mohammed Yanunus, new innovations into the sector.
Many pioneering enterprises began experimenting with loaning to the
underserved people. The main reason why microfinance is dated to the 1970s is
that the programs could show that people can be relied to repay their loans and
that its possible to restart financial services to poor people through market based
enterprises without subsidy. Shore bank was the first microfinance and
community development bank founded 1974 in Chicago. Today the World
Bank estimated more than 16 million people served by some 7000
microfinance institutions all over the world. In a gathering bat a micro credit
summit in Washington DC the goal was reaching 100 million of the world’s
poorest people by credits from the world leader and major financial institutions.
The international year of microcredit consist of five goals;
• Assess and promote the contribution of microfinance to the MFIs
• Make microfinance more visible for public awareness understanding as a
very important part of development situation.
• The promotion should be inclusive of the financial sector
• Make a supporting system for sustainable access to financial service
• Support strategy partnerships by encouraging new partnerships and
innovation build and expand the outreach and success of microfinance.
Though the growth of microfinance truly began to escalate in the early
1990s, it has existed in Cameroon for almost fifty years. The first appearance of
microfinance institutions occurred in 1963 in the Northwest Province where
Anthony Jasen, a priest from Holland, created the first savings and credit
cooperatives in the country. The relative success experienced by these
institutions lead in 1968 to the creation of the Cameroon Cooperatives Credit
Union League (better known as CAMCCUL), which is currently the longest
standing microfinance network in Cameroon. Toward the end of the 1970s,
Cameroon first began to experience an economic downturn, during which
certain banks in the country began to suffer financially from a lack of available
liquid funds. During the early 1980s, banks in Cameroon became increasingly
unable to support themselves as it became more difficult to receive international
credit and they were largely unable to obtain their own resources within the
country.22 In the late 1980s, this resulted in government action; namely, there
was a complete restructuring of all financial institutions, causing many banks to
close their doors while taking the savings of many Cameroonian citizens with
them.

• THEORETICAL BACKGROUND

Theories are formulated to predict, explain and understand phenomena and

in many cases, to challenge and extend existing knowledge, within the limits of
the credit assumptions. Theories consist of concept, together with their
definitions and existing theories that are used for the particular study.

• Financial Analysis Theory by Fuhrman (2013)

Fuhrman (2013) says the process of putting an analysis down in writing

can be instrumental in making sure as many stones as possible have been turned
over when researching a company. Famed investor Peter lynch is credited with
using the above phrase and is quoted as saying; the person that turns over the
most rocks wins the game. This has always been my philosophy when writing a
financial analysis report on a company, the following should be considered: an
overview of the company should be pro-vided showing a description of the
company to help investors understand the business, its industry, its motivation
and any edge it might have over its competitors. These factors can prove
valuable in helping to explain why a company might be a profitable investment
or not. A fundamental analysis which can also be shown in this section included
here and contain research on the firm’s financial statement, such as sales and
profit, growth trends, cash flow generation strength, debts levels and overall
liquidity and how it compares to the competition.

• Variance of Portfolio Investment Theory (DuPont Mean)

 According to Adebimpe (2009) who adopted DuPont equation stated that,
it is an expression which breaks return on equity down into three parts. The
name comes from the DuPont Corporation, which created and implemented this
portfolio formula into their business operations in the 1920s. It was adopted
from Markowitz Mean-Variance Portfolio theory which states that profit of a
firm is a function of total sales, total assets, shareholder equity contribution and
the liabilities (debts). This formula is known by many other names, including
DuPont analysis, DuPont identity, the DuPont model, the DuPont method or the
strategic profit model.
ROE=NETINCOME/SALES*SALES/TOTALASSETS*TOTAL
ASSETS/AVERAGE
SHAREHOLDERS EQUITY.
In the DuPont equation, ROE is equal to profit margin multiplied by
Assess turnover multiplied by financial leverage. Under DuPont analysis, return
on equity is equal to the profit margin multiplied by Assess turnover multiplied
by financial leverage. By splitting ROE (return on equity) into three parts,
companies can more easily understand changes in their ROE over time.
Components of the DuPont Equation: Profit Margin: Profit margin is a measure
of European Journal of Business, Economics and Accountancy.

• Proprietary theory by husband (1938)

Proprietary equity theorists such as Husband (1938), insisted that the
accounting process of companies must be conducted from the shareholders’
perspective. Staubus (1952, 1959) ,developed the residual equity theory which
considered that the accounting must be done from the perspective of the residual
equity holders, which for a going concern coincides with that of the common
shareholders. Residual equity theory is often regarded as a more restrictive form
of proprietary theory. Under the proprietary view, transactions and events are
analyzed, recorded and accounted for as to their immediate effect on the
proprietors. Financial statements are
Prepared from the viewpoint of the proprietors and are meant to measure and
analyses their net worth expressed by the accounting equation:

• PROBLEM STATEMENT
The genuineness of a financial statements has attracted diverse opinion from
both internal and external stakeholders of the banking industry, some of this
stakeholders include: general public, long and short term investors, tax
authorities and potential investors.
They argue that these financial statements do not usually give accurate
information about the performance of such business concern, for example, the
idea of stating assets on their historical cost do not favor most investors as they
argue the fact that inflation is not been taken into account, though the real value
of the assets might have been eroded.
Also the financial statement has not been audited; this means that no one has
examined the accounting policies of the issuer to ensure that it has created
accurate financial statements.
Again since this statement is always prepared by the enterprise, stakeholders
argue that there would usually be some elements of bias on the part of
management in the disclosure of managements financial ineptitude.
Management on the other hand claims that some inherent problems would
usually affect the accuracy of such reports. It is there for the intention of this
research to delve into the matter to enable him establish a relationship between
financial reporting and performance evaluate in SCOOPS
• CONCEPTUAL BACKGROUNDS OF STUDY
According to the Companies and Allied Matters Act 1990 (CAMA), financial
statement consist of accounts used to convey quantitative information of
financial nature about a business to investors, creditors, and others interested in
the reporting company’s financial condition, results of operations, users and
sources of funds. According to Duru (2012) financial statement as a statement
which conveys to management and to interested outsiders a concise picture of
the profitability and financial position of a business. Concurring with the above
definitions, published financial statement can generally be defined as the
audited annual and accounts of an organization which includes the balance
sheet, profit and loss account and the cash flow statement which give a
summary of the period presented. It is prepared by companies and organizations
duly audited by external auditors and thereafter made public for use by any
interested party. Flowing from the above, published financial statement should
be devoid of any material misrepresentation and errors so that all interested
parties can be adequately equipped with the right information to make rational
or informed decisions.

• Financial statements
To make well-informed decisions, a company’s management gleans data
from various sources amongst which are financial statements? Financial
statements therefore are a formal record of the financial activities of a business,
person or other entity. Another name for financial statements is also known as
financial report. Information on this report is presented in a structured manner
and in a form easy to understand. Given the importance of financial statement in
investment decisions, a lot of strategy goes into how a company must present its
financial data and use such information to win economic competition. Most
often the goal of financial statements is to steer the minds of the senior officers
to combine their 5business acumen to find the best ways to drive the company
towards profitability. Financial statement has specific effects on investment
decisions.
• Balance sheet
This is a statement that shows the state of affairs of the enterprise as at a
particular date. It reveals the financial position of the firm. a balance sheet
exposes the assets, liabilities and capital of the enterprise as a given date.
• Income statement
This is a statement that shows the amount of profits realized by the
enterprise for the year. It is also known as a trading and profit and loss account
and has two sections. The first section of the income statement is the trading
account and shows the gross profit realized on trading for the year. Trading
items include; sales, purchases, returns inwards, return outwards, carriage
inwards and stock in trade. The second section of the income statement is the
profit and loss account and it reveals the net profit or loss realized by the
enterprise. The net profit or loss realized by the enterprise. The net profit or loss
is equal to the gross realized on trading plus any other revenue less expenses.

• Cash flows
Another piece of the puzzle when evaluating a business’s worth is the cash
statement. This statement shows the flow of cash in and out of the business
account. Actual deposits and payment activity of account payable, payroll,
revenue is reflected here. A business that’s running low on cash but has
adequate income and Assess to fund operation may have an account receivable
problem or may need to refinance debts. on the other hand, a company
statement that shows too much cash may indicate that the business is not putting
enough resources back into its operations.
 • Statement of retained earnings or equity
Finally, the last main financial statement is the statement of retained
earnings also known as the equity statement. It shows the movement in owners’
equity over a period which is mostly determined from the company’s share
capital issued; net profit and loss as reported for the year. Most organizations
will use the first two financial statements to make investment decisions. Thus, it
is only from reviewing the financial statement that can they perform a
reasonable investment decision.

• RESEARCH OBJECTIVES
Main objective
• To know the effects of financial statements analysis on investment
decision.
Specific objectives
• To know the impact of balance sheet analyze on investment decision
making.
• To know the impact of income statement analyze on investment decision
making.
• To know the impact of cash flow analyzes on investment decision
making.

• RESEARCH QUESTIONS
Main research questions;
• What is the effect of financial statement analyzes on investment decision
making?
Specific questions
 • What is the impact of balance sheet analyzed on investment decision
making?
• What is the impact of income statement analyzed on investment decision
making?
• What is the impact of cash flow analyzes on investment decision making?

• SIGNIFICANCE
This study will help be of great importance to the researcher to the bank,
to the public, to other microfinance and the government.
A financial statement is a significant tool/document because investors and
regulators rely on accounting information to make managerial decisions.
Consequently, financial data's that are inaccurate or misleading can cause
readers and users to make wrong investment or regulatory calls. Additionally,
this study helps companies/organizations prepare financial statement under
similar accounting principles. It also creates an awareness with respect to the
great impact account reporting has on investment decisions. It shows how
finance has been raised and how it has been deployed, how relationships
between wealth generated and wealth invested can be important and helpful
indicators of business effectiveness.

• JUSTIFICATION OF THE STUDY

Financial statement analysis is used to identify the trends and relationships
between financial statement items. Both internal management and external users
(such as analysts, creditors, and investors) of the financial statements need to
evaluate a company's profitability, liquidity, and solvency. The most common
methods used for financial statement analysis are trend analysis, common‐size
statements, and ratio analysis. These methods include calculations and
comparisons of the results to historical company data, competitors, or industry
averages to determine the relative strength and performance of the company
being analyzed. This study will therefore try to establish a linkage between how
prospective investors will decide whether to invest their capital a company's
share and also to obtain useful information for their investment decisions
making purposes.

• SCOPE OF STUDY
• Time scope
It is design to cover the period of two (2) months that is from 25 th June to the
24th August.
• Space of study
The study is focused in SCOOPS-DA Cameroon, precisely in its branch
located in Yaoundé. it is located at Lycee Biyem-assi
• Content scope
The study was about the impact of financial statement on investment
decisions of microfinance institutions case study SCOOPS-DA. The study
specifically focused on how to prepare financial statements, and its impact on
investment decision.
 CHAPTER TWO
LITERATURE REVIEW

This chapter considers basic concepts outlined in the study, a review of

theoretical literature which gives us an understanding of the basis of the study,
and finally links literature to current study by considering what authors have
written with the conclusions arrived at as far as this study in concerned.
Investment decisions enable corporate leadership to analyze various investment
opportunities and to show how departments should make good commercial bets.
It therefore seeks to show the views relating to the impact of financial
statements on investment decisions in an organization. A business financial
health is reported in three financial statements. The balance shee, which shows a
record of the business assets and liabilities at a point in time. The income
statement or the profit and loss statement shows a record of its income and
expenses for a given period. The cash flow statement describes the effect of its
operations on the cash balances. Each of this required to make informed
business investment decisions.

2.1. THEORETICAL REVIEW

This consists of the structure that will support the theory of this research
study. It then goes by to introduce and describe the theories that explain why
this research is made under this study.
 2.1.1. Financial analysis theory by Fuhmann (2013)
Fuhrmann (2013) says the process of putting an analysis down in writing
can be instrumental in making sure as many stones as possible have been turned
over when researching a company. Famed investor Peter lynch is credited with
using the above phrase and is quoted as saying, the person that turns over the
most rocks wins the game. This has always been my philosophy when writing a
financial analysis report on a company, the following should be considered: an
overview of the company should be pro-vided showing a description of the
company to help investors understand the business, its industry, its motivation
and any edge it might have over its competitors. These factors can prove
valuable in helping to explain why a company might be a profitable investment
or not. A fundamental analysis which can also be shown in this section included
here and contain research on the firm’s financial statement, such as sales and
profit, growth trends, cash flow generation strength, debts levels and overall
liquidity and how it compares to the competition.
According to Michael Porter (2014) Harvard University in The Porter
five forces model helps explains company’s place within its industry.
Specifically, the factors include the threats for new entrants to enter the market,
the threat for substitute’s products or services, the extent to which suppliers can
influence the company and the intensity of rivalry among existing competitors.
Groups in USA regarded financial statement as the most important source of
information to investment decisions. In the United Kingdom, only institutional
investors made that judgment. Financial statements were found to be equally
important for ‘buy decision’ or ‘hold or sell decisions’ change and most.
Extensive studies were conducted of two categories of investors: individual
investors and institutional investors. Both individual investors and investors
regarded long term capital gains as more important than dividend income which
is more important than short-term capital gains. According to law on financial
statements 4.3, financial statements shall present true and fair view on
enterprise’s assets, liabilities, financial position, profit or loss and cash flow.
According to IAS 1.13, financial statements shall present fairly the
financial position, financial performance and cash flows of an entity. Fair
presentation requires that faithful representation of the effects. Of transaction,
other events and conditions in accordance with the definitions and recognition
criteria for assets, liabilities, income and expenses set out in the framework.
Both standards basically state that financial statements shall be true and fair,
nevertheless, this is not always the case in financial reports. Frequently,
companies manipulate with accounting data to show a better financial position
than it is; this is call ‘window-dressing’. As Rees (1995) also describes analysis
of Smith & Hannah (1991), where the latter classify the most common
accounting manipulations into 11.
• Excessive provisions: Goodwill is overstated and not expensed, thereby
increasing profits
• Extraordinary items: Significant reorganization/rationalizations costs
showed as extraordinary items.
• Off balance sheet finance: Loans not shown on balance sheet
• Capitalized costs: Inappropriate capitalization to reduce costs
• Non-trading profits: Such profits classified as normal earnings figure
• Brand accounting: Brands showed as intangible assets
• Depreciation rate change: Reduction in depreciation policy to show
growth
• Pension found holidays: Reduction in pension fund contribution shows
larger pre-tax profits
• Earn-out commitments: Profit-sharing schemes to personnel
• Foreign exchange mismatch: Mismatch between debts and deposits
• Low tax charge: If low tax charge appears, profit manipulation probable.
 Although the research by Smith & Hannah (1991) is a bit outdated, as
accounting standards have changed, still, the conclusions they make are
important. Many largest UK quoted firms have these ‘creative accounting’
procedures. They also found that these procedures significantly affect important
security market variables – price/earnings ratio, annual abnormal return and
beta.

2.1.2. Variance of Portfolio Investment Theory by DuPont Mean

(2009)
According to Adebimpe (2009) who adopted DuPont equation stated that,
it is an expression which breaks return on equity down into three parts. The
name comes from the DuPont Corporation, which created and implemented this
portfolio formula into their business operations in the 1920s. It was adopted
from Markowitz Mean-Variance Portfolio theory which states that profit of a
firm is a function of total sales, total assets, shareholder equity contribution and
the liabilities (debts). This formula is known by many other names, including
DuPont analysis, DuPont identity, the DuPont model, the DuPont method or the
strategic profit model
ROE=NETINCOME/SALES*SALES/TOTALASSETS*TOTAL
ASSETS/AVERAGE
SHAREHOLDERS EQUITY.
In the DuPont equation, ROE is equal to profit margin multiplied by
Assess turnover multiplied by financial leverage. Under DuPont analysis, return
on equity is equal to the profit margin multiplied by Assess turnover multiplied
by financial leverage. By splitting
ROE (return on equity) into three parts, companies can more easily
understand changes in their ROE over time. Components of the DuPont
Equation: Profit Margin: Profit margin is a measure of European Journal of
Business, Economics and Accountancy Profitability. It is an indicator of a
company's pricing strategies and how well the company controls operating
costs. Profit margin is calculated by finding the net profit as a percentage of the
total revenue. As one feature of the DuPont equation, if the profit margin of a
company increases, every sale will bring more money to a company's bottom
line resulting in a higher overall return on equity. Components of the DuPont
Equation: Assess Turnover Assess turnover is a financial ratio that measures
how efficiently a company uses its assets to generate sales revenue or sales
income for the company. Companies with low profit margins tend to have high
Assess turnover, while those with high profit margins tend to have low Assess
turnover. Similar to profit margin, if Assess turnover increases, a company will
generate more sales per Assess owned, once again resulting in a higher overall
return on equity. Components of the DuPont Equation: Financial Leverage:
Financial leverage refers to the amount of (liabilities) debt that a company
utilizes to finance its operations, as compared with the amount of equity that the
company utilizes. As was the case with Assess turnover and profit margin,
increased financial leverage will also lead to an increase in return on equity.
This is because the increased use of debt as financing will cause a company to
have higher interest payments, which are tax deductible. Because dividend
payments are not tax deductible, maintaining a high proportion of debt in a
company's capital structure leads to a higher return on equity.

2.1.3. Proprietary theory by husband (1938)

Proprietary equity theorists such as Husband (1938), insisted that the
accounting process of companies must be conducted from the shareholders
‘perspective. Staubus (1952, 1959), developed the residual equity theory which
considered that the accounting must be done from the perspective of the residual
equity holders, which for a going concern coincides with that of the common
shareholders. Residual equity theory is often regarded as a more restrictive form
of proprietary theory.
 Under the proprietary view, transactions and events are analyzed,
recorded and accounted for as to their immediate effect on the proprietors.
Financial statements are prepared from the viewpoint of the proprietors and are
meant to measure and analyses their net worth expressed by the accounting
equation:
(1) Σ assets – Σ liabilities = Σ equity, proprietorship or net worth
In the proprietary view, the assets are considered the proprietors’ assets,
and the liabilities are the proprietors’ liabilities. According to New love and
Garner (1951) under proprietary theory “liabilities are negative assets – negative
properties, which must be sharply defined and separated in the accounting
process.” Revenues are increases in proprietorship and expenses are decreases.
Net profits, “the excess of revenues over expenses, accrues directly to the
owners; it represents an increase in the wealth of the proprietors.” (Hendriksen
and Van Breda, 1992) Staubus (1959) narrowed the concept of owners to
common stockholders and considered preference shareholders as liability
holders and stressed the importance to investors of the estimation of future cash
receipts. The accounting equation becomes:
(2) Assets – Specific Equities (=Liabilities + Preferred Stock) = Residual
Equity
The proprietary approach represents an agency view of the company
where the main responsibility of management is to manage the firm in the best
interests of the owners.
As the assets and liabilities are considered the owners’ assets and liabilities, the
maximization of profits equals maximization of the increase in the shareholders’
net assets. For this reason, the Assess/liability approach to income
determination, where
Income is the by-product of the valuation of assets and liabilities, is the most
direct way of quantifying the increase in net assets. Under both the proprietary
theory and the Assess/liability approach to income determination, it is
imperative that shareholders’ interests are sharply distinguished from the
interests of the providers of debt capital in order to be able to measure the
increase in net assets.

2.2. CONCEPTUAL REVIEW

According to Damodaran (2013) points out that, when evaluating a
company’s profitability and potential return in investment, there are several
questions that the financial statement when used in conjunction with one
another answers. Thus, the amount of debt the business has or can take, the
operating cash the business has, and the value of its products and investment
can all be found in the balance sheet, income statement, and cash-flow.
However to some extent, since managers are shareholders or owners of
organization, the preparation of financial statements is very important for
investment decisions. This chapter considers basic concepts outlined in the
study, a review of theoretical literature which gives us an understanding of the
basis of the study, and finally links literature to current study by considering
what authors have written with the conclusions arrived at as far as this study in
concerned. Investment decisions enable corporate leadership to analyze various
investment opportunities and to show how departments should make good
commercial bets. This chapter therefore seeks to show the views relating to the
impact of financial statements on investment decisions in an organization. A
business financial health is reported in four financial statements. The balance
sheet, which shows a record of the business assets and liabilities at a point in
time. The income statement or the profit and loss statement shows a record of
its income and expenses for a given period. The cash flow statement describes
the effect of its operations on the cash balances, lastly Statement of retained
earnings or equity which shows the movement in owners’ equity over a period
which is mostly determined from the company’s share capital issued; net profit
and loss as reported for the year. Each of this required to make informed
business investment decisions.

Figure 1 : Conceptual diagram

Dependent variable Independent variable
Investment decisions
To know the impact of balance sheet analyzes on investment decision making
To know the impact of income statement analyzes on investment decision
making
To know the impact of cash flow analyzes on investment decision making
Social factors
Economic factor

2.2.1. Financial statements

To make well-informed decisions, a company’s management gleans data
from various sources amongst
Which are financial statements? Financial statements therefore are a
formal record of the financial activities of a business, person or other entity.
Another name for financial statements is also known as financial report.
Information on this report is presented in a structured manner and in a form easy
to understand. Given the importance of financial statement in investment
decisions, a lot of strategy goes into how a company must present its financial
data and use such information to win economic competition. Most often the
goal of financial statements is to steer the minds of the senior officers to
combine their 5business acumen to find the best ways to drive the company
towards profitability. Financial statement has specific effects on investment
decisions.
 Types of financial statements
There are basically 4 main types of financial statements. They include:
The balance sheet, income statement, cash flow statements and statement of
retained earnings.

• Balance sheet
While the income statement is essential to understanding the business, it
doesn’t contain all the information needed for a thorough analysis. The balance
sheet provides the readers with data concerning the business debt loads and the
value of assets such as real estate. While a business’s revenue might be very
healthy and increasing, if it’s burdened with too much debt, or many
outstanding invoices that its clients haven’t paid, they may not be clear on the
income statement. It will be apparent on the balance sheet, however.
Alternatively, a business with significant real estate or other assets that aren’t
monetized on the income statement will appear here; for example, if the
business owns its own building, land, or plant, these values will be listed in the
balance sheet. Thus, the balance sheet comprises of:
Assets: Refers to the thing owned by the business
Liabilities: Something the business owes it owners and represents the
amount of capital that remains in the business after the Assess are sold to pay its
outstanding invoices. Thus, the difference between assets and liability equals
equity. That is:
Assets – liability = equity
Table 1: The vertical presentation of a balance sheet
The name of the enterprise
Balance sheet as at 31st December 20X9
FCFA FCFA FCFA
Fixed Assets: XXX
Land and Building XXX
Machinery XXX
Equipments XXX
Fixtures and XXX
Fittings
Motor van, etc
Current assets: XXX
Stocks XXX
Debtors XXX
Bank XXX
Cash XXX
Prepayments, etc XXX XXX
Current
Liabilities:
Bank overdraft XXX
Creditors XXX
Accruals ,etc XXX (XXX)
Working capital XXX
Financed by:
Capital XXX
Net profit XXX
Drawings (XXX) XXX
Long term
liabilities:
 Long term loans XXX
XXX

• Income statements
The income statement tells the reader how much money the company made
from and spent over a certain period, usually a month, quarter or a year.
Subtracting the total expense from total revenue reveals the business’s margin.
Higher margins are better because it means the business can spend less and keep
a greater percentage of revenue as profit. It is best to analyze income statement
from several consecutive years because it reveals what direction the business is
heading to. As such with income statement often asked:
Are margins growing smaller or larger?
Is revenue growing along with the expenses or are only expenses growing
while the revenues remain flat?
All these questions are answered by reading the income statements.
The income statement can be presented vertically as shown below;

Table 2 : The name of the enterprise

Trading and profit and loss account as at 31st December 20x9
FCFA FCFA FCFA
Sales XXX
Returns inward XXX XXX
Less Cost of goods sold:
Purchases XXX
Opening stock XXX
Returns outward (XXX)
Carriage inward XXX
Cost of goods available for XXX
sale
 Closing stock ( XXX) (XXX)
Gross profit XXX
Add revenues received like;
Discount received, rents XXX
received, etc
Less expenses:
Transport and insurance XXX
Wages and salaries XXX
Lighting and heating XXX
Rents and rates XXX
Interest paid XXX
Carriage outward XXX
Discounts allowed XXX
Bad debts XXX
Provision for doubtful debts XXX (XXX)
XXX (XXX)
Net profit or loss XXX

• Cash flow statements

Another piece of the puzzle when evaluating a business’s worth is the cash
statement. This statement shows the flow of cash in and out of the business
account. Actual deposits and payment activity of account payable, payroll,
revenue is reflected here. A business that’s running low on cash but has
adequate income and Assess to fund operation may have an account receivable
problem or may need to refinance debts. on the other hand, a company
statement that shows too much cash may indicate that the business is not putting
enough resources back into its operations. As a result, using the cash flow
statement and performing calculation on operating, investment and financing
activities. This hence brings us to what operating, investing and financing
activities are; operating activities; it represents the cash flow from short term
operating and primary activities of a business that is its current assets and
current liabilities. This section evaluates net income and loses of a business. By
assessing sales and business expenditure, all income from non-cash items is
adjusted to incorporate inflows and out flows of cash transactions determine a
net figure.
Investing activities; represents cash flow from the purchase and sale of
goods, this section reports inflow from purchase and sales of long-term business
investment such as property, assets, equipment, and securities. Increase in
investment indicates a cash outflow (use of fund) and decrease in investment
signals a cash inflow.
Financing activities; Represents cash flow generated or spend on raising
share capital and debt together with the payment of interest and dividends. It
also accounts for all money that is related to financing your business. For
example, if you received a loan from your organization, the loan itself will be
considered as an inflow of cash. Loan repayment will be considered as an out
flow of cash and both will be recorded in this part of the cash flow analysis
statement making cash flow projections and computing cash flow statement can
be confusion if you have never managed these types of finances before.

• Statement of retained earnings or equity

Finally, the last main financial statement is the statement of retained
earnings also known as the equity statement. It shows the movement in owners’
equity over a period which is mostly determined from the company’s share
capital issued; net profit and loss as reported for the year. Most organizations
will use the first two financial statements to make investment decisions. Thus, it
is only from reviewing the financial statement that can they perform a
reasonable investment decision.
 2.2.2. Use and users of financial statement
According to Yuh (2013) points out; the main group users of financial
statement include investors, employees, customers, government and public.
What then are the needs of this group and how would they use these financial
statements? They include the following:
Investor group; this group comprises of both existing and potential
shareholders. They would consider either investing or disinvesting in the
business. Equity investors consider two elements to their investment, gain and
income: income in the form of dividends and gain in the form of share prices.
Employees; It is encouraging to note that some companies produce a
separate employee report. Employees and their representatives require
information on business performance for two principal reasons:
For wage and salary negotiation
Assessment of current and forward opportunities in terms of employment.
They would be interested in both the current financial stability of the
business in terms of cash flow and the organizations ability to meet its short-
term liabilities.
Customer; This group is interested in the business short and long term
financial stability and its potential to supply quality goods and services. They
may also have interest in the environmental policy of the business.
Governments; The government department uses financial statement for
the purposes of taxation, which is the company’s taxation and VAT. The
government therefore is decision makers and their forward economic plan is
influenced by the performance of all businesses within the various sectors in the
economy.
Public; Most often, public is been referred to “shareholders” and business
that do not exist solely in isolation. Businesses are part of society at large and as
such generate much public interest .At local and national levels factor such as
employment and environment are often key interest.

2.2.3. Interpretations of financial statements

Financial statements can easily be interpreted by the use of ratios. Ratios
themselves have no meaning unless when compared other ratios of passed
periods or with those of other companies. A thorough ratio analysis can enable
one to assess the business in terms of;
Profitability, solvency, efficiency, capital structure and shareholders
investments.
• Profitability ratios
• Return on capital employed(ROCE)
This is the main profitability ratio(best) it measures how efficiently
capital has been employed by management.
ROCE=net income/total assets

• Profit margin (PM)

This ratio measures how sales are profitable and the control of operating
cost.
PM=net income/sales*100

• Gross profit margin(GPM)

GPM=gross profit/sales*100

• Net profit margin(NPM)

NPM= Net profit/sales*100
 • Return on equity
ROE=net profit /ordinary share*100
• Assess utilisation ratios
It measures how productively a firm is using its assets. It also analysis
how efficiently, debtors and inventories are managed. Inventories and debtors
are required to support the firm sales activities. We will examine 5 ratios on
Assess utilization.
Receivables turnover, average collection period, inventory turnover, fixed assets
turnover, total Assess turnover.
• Liquidity ratios
Liquidity is the ability of a company to have enough cash and other near
cash assets which can easily be converted into cash without any loss in value.
Liquidity ratios can be classified as short term or long term.
Short term liquidity ratios
These ratios include; current ratio, acid test ratio, cash ratios.
Long term liquidity ratio
These ratios include; interest covered, debts to total assets, total gearing
ratio, equity gearing ratio.
Investment ratios
These ratios include; price per earnings ratios, share price, earning per
share, dividend per share, dividend covered, dividend payout ratio, earnings
yield , debtors collection period, creditors payment periods, stock ratio turnover.

2.2.4. Importance of Financial Statement

The perception of investors about the company’s ability influences
investor’s decisions to invest. Financial information can only be useful if a well
understood published financial statement is the information source that is most
directly related to the items of interest to both existing and potential investors.
According to Lunt (1999), the satisfaction of the needs of various users of
accounting information as contained in the annual report can be acceptable as
the objective of financial statement. This objective of financial information is
to;

• Emphasized by the various accounting principles because investors and

creditors use them in making rational investment decision. Financial
statement fairly represents business and economic situation of a country,
which if studied carefully can lead to the achievement of some financial
and economic goals. For instance, the balance sheet provides the investor
with a clear picture, of the financial conditions of the company as a
whole. It list in details the tangible and intangible assets that the company
owns and owes, while the profit and loss accounts period loss accounts
summarizes the income expenses and expenditures of the company in a
given period of time.

• It is through the use of financial reports that users can assess the project
of receiving cash as divided or interest and proceeds from sales,
exemptions or maturing securities or loans for instance. Cash flow
statement shows how cash is predicted to move around at a particular
given period of time. It is useful for planning future expense. It shows
whether or not there will be enough cash to carry out the planning
activities and whether or not the cash coming in will be enough to cover
the expenses.

• It is useful in the determination of the company’s liquidity in a given

period of time. According to Elis & Thacker (1998), the most important
purpose of the financial statement is to get the investors informed about
the financial position. The usefulness of financial statement to the
investor is to assist them assess the ability of the enterprise to pay
dividend and interest when due, while to the potential investors,
 published financial statement is used to decide on the type of investment
decision the investor will make and which company to invest in, as such
financial statement of organizations should provide information about the
economic resources of the organization, which is the source of
prospective cash inflows to the company.

• It should also provide its obligation to transfer economic resources to

others which are the source of prospective cash outflows from the
organization and its earnings which are the final results of its operations.
According to Gentry & Fernandez (2008), also find that annual reports
and interviews with company officials were the most important sources of
financial information in assessing the firm’s value and therefore
informing investment decision or equity selection process.

• Investment decision makers use financial statement of different firm’s for

financial decision making purposes. In this instance, financial analyst
becomes useful in gathering, analyzing, and interpreting the accounting
results to potential investors for use in making investment decisions.

• Publication of financial statement provides a way for banks or firms to

present its financial health or otherwise to shareholders, creditors, general
public and to potential investors, to enable them make rational investment
decisions.

• The role of financial statement analysis in making investment decisions

should not be overlooked as it helps investors to establish the fiscal
strength and weakness of the firm. Financial statement analysis can reveal
the red flags of an investment opportunity. on the other hand, they can
also reveal the strength of the company as well as the potential profit of
investing in a particular company.
• By their nature, financial statements are retrospective, which means an
investor should never look at a single statistic or matrix in making
investment decisions. For instance, an actual or potential investor must
analyze the statement of financial position, to assess the company’s
assets, liability and ownership equities (net worth) at a particular point in
time.

• Also, the investor will assess the income statement to know the
company’s expense income and profit or loss over a specific period of
time. He will also assess the cash flow statement, to find out how the
company raised up cash through investors or creditors; how cash is used
to acquire assets and inventory; how the assets and inventory allows the
organization to generate cash to pay for business expenses; and finally
how the cash is returned to investors and creditors.

• Moreover, the purpose of cash flow analysis is to estimate the amount an

investor would receive from an investment, based on future free cash-
flow projections for the company, at least in the short term, financial
information is like an x-ray, they provide multiple angles for proper
diagnosis of the company. Each financial statement provides the user a
unique perspective, and together the statements point a clearer and
complete picture into the financial condition of a company. Additionally,
investment bankers also rely heavily on financial statement when
determining the sustainability of corporate businesses. For instance, a
company cannot be bought or sold without determining an agreed up
valuation. Therefore, financial statement help bankers establish
appropriate price for transactions
2.3. INVESTMENT AND DECISION-MAKING CONCEPTS
• Definition and Nature of Investment
According to Bodie, Kane and Marcus (2001), investment is the
commitment of current funds or other resources in the expectation of reaping
future benefit. As postulated by Pandey (2005), investment decision has to do
with an efficient allocation of capital. It involves decision to commit funds in
long-term assets. Such decisions are of considerable importance to the firm and
the individual since they tend to determine the value and size by influencing the
growth, profitability and risk.

• Decision Making
According to Nwachukwu (1988), sees decisions as “the selection of
alternatives courses of action from available alternatives in other to achieve a
given objective”. According Stoner (2000), decision “is the process of
identifying and selecting a course of action to deal with a specific problem or
take advantage of an opportunity”.
• Tools of Investment Decision Making
The major tool for these investment decisions is the ratio analysis. Ratio
analysis is the judgmental process which aims at evaluating the current and past
financial positions and the results of an entity, with the primary objectives of
determining the best possible estimate about the future conditions and
performances. It provides a quick diagnostic look at an entity’s financial health
and provokes subsequent financial and operational analysis. (Okwoli, 1992).
From the foregoing, the figures are used in the financial analysis are being
extracted from the financial statements which in turn inform investment
decisions. Several ratios exists but this Effect of Financial Information on
Investment Decision Making by Shareholders of Banks research work will only
X-ray the major ones that are used in investment decision and the major issues
to note here is that financial statements are the major sources of the raw
materials for investment decision making.

• Financial Ratio Analysis

According to Aborode (2005) Financial ratio shows the relationship between
two or more financial or statistical data in a financial statement or management
account .According to Gavtam (2005), assert that ratio analysis is a process of
determining and interpreting the relationship between the items of financial
statement to provide a useful understanding of the performance, solvency and
profitability of an enterprise. More so, for ratio to be useful in investment
decision, it must be compared with earlier periods of trends with similar
organizations in the industry to determine strengths and weaknesses, compared
with the industrial average. Financial ratio may be expressed as a percentage or
in relation to another figure or group of figures in the same financial statement.
The needs of accounting information users are not normally the same. This
depends largely on the type of users and the purpose for which the information
is to be used. For the purpose of this study dividend per share ratio is considered
relevant and useful to the shareholders as postulated by Igben (2005);
Dividend per Share (DPS) Ratio:
This ratio shows the amount of gross dividend on much issued ordinary
share ranking for dividend in the period.
The need for ratio analysis cannot be overemphasized as it can be used
for performance measurement which includes appraising the performance of an
organization (Igben, 2009).

2.4. METHODS OF EVALUATING INVESTMENT PROJECTS

There are five (5) techniques in evaluating investment projects which are;
 Accounting Rate of Return (ARR), and Payback Period (PBP) which are
the traditional methods and Net Present value (NPV), Internal Rate of Return
(IRR) and the Profitability Index (PI) which are the modern methods.

• Accounting Rate of Return Method (ARR)

The accounting rate of return is also known as ‘return on investment’ or
‘return on capital employed’ method employing the normal accounting
technique to measure the increase in profit expected to result from an
investment by expressing the net accounting profit arising from the investment
as a percentage of that capital investment. The method does not take into
consideration all the years involved in the life of the project. In this method,
most often the following formula is applied to arrive at the accounting rate of
return.
Sometimes, initial investment is used in place of average investment. Of
the various accounting rates of return on different alternative proposals, the one
having highest rate of return is taken to be the best investment proposal.
ARR annual PAT = sum of PATS/ Number of years

Merits
The merits of accounting rate of return method are as follows:
• It is easy to calculate because it makes use of readily available accounting
information.

• It is not concerned with cash flows but rather based upon profits which
are reported in annual accounts and sent to shareholders.

• Unlike payback period method, this method does take into consideration
all the years involved in the life of a project.
 • Where a number of capital investment proposals are being considered, a
quick decision can be taken by use of ranking the investment proposals.

• If high profits are required, this is certainly a way of achieving them.

Demerits
The demerits of accounting rate of return method are summarized as
follows:
• It does not take into accounting time value of money.

• It fails to measure properly the rates of return on a project even if the cash
flows are even over the project life.

• It uses the straight line method of depreciation. Once a change in method

of depreciation takes place, the method will not be easy to use and will
not work practically.

• This method fails to distinguish the size of investment required for

individual projects. Competing investment proposals with the same
accounting rate of return may require different amounts of investment.

• Pay Back Period (PBP)

This is the most popular and widely recognized traditional method of
evaluating an investment project. It is based on the principle that every capital
expenditure pays back itself within a certain period, out of the additional
earnings generated from the capital Assess.

PBP is the number of years required to recover the original cash outlay
invested in a project.

It can be calculated as follows:

PBP= Cash outlay/Annual cash flow
 Merits of PBP
• It is a cash flow method

• It is very simple and easy to understand

• It indicates the riskiness of a project

Demits of PBP
• It does not consider other cash flow after the other PBP

• It ignores the time value of money and treats all cash flows equally
though they may occur in different periods

• It does not take into account the cost of capital which is a very important
factor in making good investment decisions

• Net Present Value Method:

The objective of the firm is to create wealth by using existing and future
resources to produce goods and services. To create wealth, inflows must exceed
the present value of all anticipated cash outflows. Net present value (NPV) is
obtained by discounting all cash outflows and inflows attributable to a capital
investment project by a chosen percentage e.g., the entity’s weighted average
cost of capital.

The method discounts the net cash flows from the investment by the
minimum required rate of return, and deducts the initial investment to give the
yield from the funds invested. If yield is positive the project is acceptable. If it
is negative the project is unable to pay for itself and is thus unacceptable. The
exercise involved in calculating the present value is known as ‘discounting and
the factors by which we have multiplied the cash flows are known as the
‘discount factors’.

Discount factor = 1/(1+r)n

Where, r = Rate of interest p.a.
n = number of years over which we are discounting.
Discounted cash flow is an evaluation of the future net cash flows
generated by a capital project, by discounting them to their present day value.
The method is considered better for evaluation of investment proposal as this
method takes into account the time value of money as well as, the stream of
cash flows over the whole life of the project. The discounting technique
converts cash inflows and outflows for different years into their respective
values at the same point of time, allows for the time value of money.

Merits:
• It explicitly recognizes the time value of money.

• It considers the cash flow stream in its entirety.

• It squares neatly with the financial objective of maximization of the

wealth of stockholders. The net present value represents the contribution
to the wealth of stockholders.

• The net present value (NPV) of various projects, measured as they are in
today’s rupees, can be added.

For example, the NPV of a package consisting of two projects A and B,

will simply be the sum of NPV of these projects individually:
NPV(A + B) = NPV(A) + NPV(B)
 The additively property of NPV ensures that a poor project (one which
has a negative NPV) will not be accepted just because it is combined with a
good project (which has a positive NPV).

A changing discount rate can be built into NPV calculations by altering

the denominator. This feature becomes important as this rate normally changes
because the longer the time span, the lower is the value of money and the higher
is the discount rate.

This method is particularly useful for the selection of mutually exclusive

projects.

Demerits:
The demerits of NPV method are as follows:
• It is difficult to calculate as well as understand and use.

• The ranking of projects on the NPV dimension is influenced by the

discount rate – which is usually the firm’s cost of capital. But cost of
capital is quite a difficult concept to understand and measure in practice.

• It may not give satisfactory answer when the projects being compared
involve different amounts of investment. The project with higher NPV
may not be desirable if it also requires a large investment.

• It may mislead when dealing with alternative projects of limited funds

under the condition of unequal lives.

• The NPV measures an absolute measure, does not appear very

meaningful to businessmen who think in terms of rate of return measures.
 • Internal Rate of Return Method (IRR)

Internal rate of return (IRR) is a percentage discount rate used in capital

investment appraisals which brings the cost of a project and its future cash
inflows into equality. It is the rate of return which equates the present value of
anticipated net cash inflows with the initial outlay. The IRR is also defined as
the rate at which the net present value is zero.

The rate for computing IRR depends on bank lending rate or opportunity
cost of funds to invest which is often called as ‘personal discounting rate’ or
‘accounting rate’. The test of profitability of a project is the relationship
between the IRR (%) of the project and the minimum acceptable rate of return
(%).

The IRR can be stated in the form of a ratio as shown below:

P.V. of Cash Inflows – P.V. of Cash Outflows = Zero

The IRR is to be obtained by trial and error method to ascertain the

discount rate at which the present values of total cash inflows will be equal to
the present values of total cash outflows.

If the cash inflow is not uniform, then IRR will have to be calculated by
trial and error method. In order to have an approximate idea about such
discounting rate, it would be better to find out the ‘factor’. The factor reflects
the same relationship of investment and cash inflows as in case of payback
calculations.

F = I/C
Where, F = Factor to be located
I = Original Investment
 C = Average cash inflow per year
In appraising the investment proposals, IRR is compared with the desired
rate of return or weighted average cost of capital, to ascertain whether the
project can be accepted or not. IRR is also called as ‘cut off rate’ for accepting
the investment proposals.

Merits:
• The merits of IRR method are as follows:
• It considers the time value of money.

• It takes into account the total cash inflows and cash outflows.

Demerits:
The demerits of IRR method are given below:
• It does not use the concept of desired rate of return, whereas it provides
the rate of return which is indicative of the profitability of investment
proposal.

• It involves tedious calculations, based on trial and error method.

• It produces multiple rates which can be confusing.

• Projects selected based on higher IRR may not be profitable.

• Unless the life of the project can be accurately estimated, assessment of

cash flows cannot be correctly made.

• Profitability Index Method (PI)

It is a method of assessing capital expenditure opportunities in the
profitability index. The profitability index (PI) is the present value of an
anticipated future cash inflows divided by the initial outlay The only difference
between the net present value method and profitability index method is that
when using the NPV technique the initial outlay is deducted from the present
value of anticipated cash inflows, whereas with the profitability index approach
the initial outlay is used as a divisor.
In general terms, a project is acceptable if its profitability index value is
greater than 1. Clearly, a project offering a profitability index greater than 1
must also offer a net present value which is positive. When more than one
project proposals are evaluated, for selection of one among them, the project
with higher profitability index will be selected.
This method is also called ‘benefit-cost ratio’ or ‘desirability ratio’
method.

Limitations:
The limitations of profitability index method are as follows:
Profitability index cannot be used in capital rationing problems where
projects are indivisible. Once a single large project with high NPV is selected,
the possibility of accepting several small projects which together may have
higher NPV than the single project, is excluded.

Sometimes the project with lower profitability index may have to be selected if
it generates cash flows in the earlier years, which can be used for setting up of
another project to increase the overall NPV.

The steps in making investment decisions

We firmly believe there should be a process for making investment
decisions that involves these five steps in the following order: Purpose, Time,
Risk, Tool, Monitor and Adjust.
 Purpose
Money is a tool that can be used to perform a task or actions aimed at
producing a desired result. Have you ever tried to drive a nail with a
screwdriver or pliers? It can be done, but the most efficient tool to drive the nail
would be a hammer.
Wouldn’t it make sense to define the result the researcher desire before
the researcher select the tools the researcher will use to achieve my purpose? If
we think of money, investments and savings as tools, it becomes clear that we
must first define our purpose in order to select the proper tool for the job.

Time
So, we have defined a purpose. What comes next? Knowing how long we
have to achieve our purpose is the next important step in our decision process.
Our goals should be structured as short-, mid- and long-term. Knowing when
we want to achieve our goal/purpose and its duration will greatly affect our
choice of investment tools. For example, short-term goals might require that we
take less risk and keep the funding in a more accessible or liquid form. Some
products or investments require that the funds be committed for a set or
indeterminate time frame. There may be surrender charges, penalties, fees or tax
consequences for cashing out early.

Risk
The possibility of suffering harm or loss; danger. The other face of
reward is risk. Risk might be the most misunderstood function of selecting
investment tools. Not all risks are created equal, nor does everyone view risk
the same way. We each must work to understand the risk/reward relationship
and determine our own willingness to accept risk.
The variability of returns from an investment
The risk we take may be of our own making. Financial decision-making based
on emotional responses has led many investors into unfavorable results. The old
saying “buy low and sell high” gets turned upside down frequently when we
allow greed or fear to make our decisions for us. It is not uncommon for
investors to enter the market at or near its high point, having been seduced by
upward trends, only to see a significant downward trend follow their entry. This
downward trend in the markets causes that “feel the pain” mentioned earlier to
kick in, which leads to exiting the market at its lower levels. We just bought
high and sold low; this is far more common than you might imagine. While a
professional analytical approach to decision-making cannot guarantee success,
it can help manage the risk of making decisions based on emotions.
Another type of risk is being too cautious. An excess of caution can lead
to under-performance, causing failure to achieve the desired purpose. In today’s
world, cash may be safe, but it will not provide the growth needed to sustain
buying power that may be eroded by inflation.
It is also necessary to be aware of the risk of fraud, as well as of the
abilities of the companies where we place our trust to fulfill their obligations
and promises. We must do our due diligence to assure ourselves that the people
and companies we do business with are of the highest caliber. This is not
something to do only when deciding to invest or place funds; you should make a
habit of doing follow-up inquiries on a regular basis.

Tools
Once we have defined our purpose, determined our time frame, and
assessed our risk, it is time to choose our tools. Every financial product in
existence has its own benefits, costs and rules of use. There can be great
variations in these features, even within different versions of the same types of
products or investments.
 In comparing benefits, costs and rules, you should always do so in
relation to your needs and desires. You can own the best hammer in the world,
but it is of little value if what you really need is a plain, ordinary screwdriver. It
is vital to understand which tool fits your needs the best. If what you need is a
low-risk, income-producing fund, you most likely should not be swayed by the
wonderful, flashy high-return hedge fund someone has or is selling.

Monitor and Adjust

Colin Powell, along with many others throughout history, said something
to the effect of, “No plan of battle survives meeting the enemy on the field.” In
other words, things change. Goals, purposes and situations can change over
time. Economic conditions, tax structures, investment climates, and rules will
change. You need to work at monitoring your plan and make adjustments as
needed. This requires you and your advisor or money manager to be proactive
in monitoring the plan and meet regularly to discuss progress or changes.
Regular reporting to you through emails, texts of status, or phone calls should
be a part of the service you receive.With technology available today, your
portfolio could be monitored on a daily basis with prompt updates of the
account’s status. Certain reporting systems can pull online reports of your
investments and savings accounts into one easy-to-use interface and send you
weekly updates via email, or you can log in to view them at any time. It is my
opinion that annual reviews are not sufficient, especially during the first year of
working with an advisor. the researcher suggest quarterly reviews during the
first year, and then choose your comfort level for full reviews thereafter; either
way, there should be regular contact with your advisors. Things can change
quickly sometimes, and regular exchanges will help keep you in the loop.

2.3. REVIEW BY OBJECTIVES

 2.3.1. To know the impact of balance sheet analyzes on investment
decision making
  The balance sheet displays the company’s assets, liabilities,
and shareholders’ equity. As commonly known, assets must equal liabilities
plus equity. The Assess section begins with cash HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/cash-
equivalents/" HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/cash-
equivalents/"and HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/cash-
equivalents/" HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/cash-
equivalents/"equivalents, which should equal the balance found at the end of the
cash flow statement. The balance sheet then displays the changes in each major
account. Net income from the income statement flows into the balance sheet as
a change in retained HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/retained
-earnings-guide/" HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/retained
-earnings-guide/"earnings (adjusted for payment of dividends).
• Shows the financial position of a business
• Expressed as a “snapshot” or point in time (the researcher.e. as at
December 31, 2017)
• Has three sections: assets, liabilities, and shareholders’ equity
• Assets = Liabilities + Shareholders Equity
• Shows the net change in cash balance from start to end of the period

2.3.2. To know the impact of income statement analyzes on

investment decision making
 Often, the first place an investor or analyst will look is the income
statement. The income HYPERLINK
"https://corporatefinanceinstitute.com/resources/templates/financial-
modeling/income-statement-template/" HYPERLINK
"https://corporatefinanceinstitute.com/resources/templates/financial-
modeling/income-statement-template/"statement shows the performance of the
business throughout each period, displaying sales revenue at the very top. The
statement then deducts the cost of goods sold (COGS) to find gross
HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/gross-
profit/" HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/gross-
profit/"profit. From there, the gross profit is affected by other operating
expenses and income, depending on the nature of the business, to reach net
HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/what-is-
net-income/" HYPERLINK
"https://corporatefinanceinstitute.com/resources/knowledge/accounting/what-is-
net-income/"income at the bottom – “the bottom line” for the business.
• Shows the revenues and expenses of a business
• Expressed over a period of time (i.e. 1 year, 1 quarter, Year-to-Date, etc.)
Uses accounting principles such as matching and accruals to represent
figures (not presented on a cash basis)
• Used to assess profitability

2.3.3. To know the impact of cash flows analyzes on investment

decision making
 The cash flow statement then takes net income and adjusts it for any non-
cash expenses. Then, using changes in the balance sheet, usage and receipt of
cash is found. The cash flow statement displays the change in cash per period,
as well as the beginning balance and ending balance of cash.
• Shows the increases and decreases in cash
• Expressed over a period of time (i.e. 1 year, 1 quarter, Year-to-Date, etc.)
• Undoes all accounting principles to show pure cash movements
• Has three sections: cash from operations, cash used in investing, and cash
from financing

2.4. PRESENTATION OF YOUR ORGANIZATION

SCOOPS DA is a microfinance institution serving its customers with a
variety of products. Why it is important for us here to make a general
presentation of this structure.

2.4.1 Presentation of internship activities.

As the internship period (July- September 2019) coincided with the
period of analyzing of financial statements, so we had to analyze financial
statements which gave me the opportunity to be involved in the process. During
which the researcher asked some questions that enabled us to collect
information on how the financial statements were presented at the enterprise.
Also it coincided with how to journalize the bank reconciliation.

2.4.2. Departments of SCOOPS-DA where I carried my internship

• The secretariat
               Placed under the authority of the head of agency, it is held by a
secretary whose role is:
• Enter the different meeting reports;
• Classify the important and confidential documents of the company;
 • Manage phone calls.
• Accounting service
  Placed under the authority of the head of agency, it is composed of a
head of department and an assistant accountant. In this department, we were
taking care of:
• Pointing of operations, which consists of comparing accounting
documents received from the cash register and those posted by the
computer system at the end of the day?
• The establishment of the daily cash budget;
• The accounting management of personnel payments;
• Accounting for miscellaneous transactions.
• The marketing department
        He is responsible for managing the SCOOPS DA customer files, providing
customer orientation and information. He is also responsible for the design,
promotion and dissemination of products and services of the business. For this
purpose, it is responsible for establishing a marketing plan according to the
objectives assigned to it by the general management through the head of
agency. He is assisted by a team of salesmen and collection agents.
• The credit service
               In this department, we were responsible for analyzing all credit files
reached at the level of the agency, to provide information on the type of
commitment made at the time; the granting of credit for the operation of a
project. It aims to limit the risks that revolve around a credit transaction and
especially non-reimbursement, in order to transmit the file to the credit
committee for validation.
• Operations Management Service
               He manages client accounts, ensures the accuracy and regularity of the
entries in the accounts, manages the treasury of the company, and ensures the
proper functioning of the fund.

• Customer service
In this customer’s service, we worked with the customer service agent
and we were assigned to receive the clients and assist them with regards to
whatever problems or doubts they may have linked to their account or other
services proposed by the enterprise, we were to direct them where to go in the
enterprise depending on what they come for. Also, we opened accounts, we also
did scanning and photocopies.

2.5. HISTORY AND FUNCTIONING OF SCOOPS-DA

History
     Like most African states in general, Cameroon's economic environment is
characterized by an increase in activities in the informal sector; this increase led
to the emergence of microfinance institutions. Said outbreak enabled the
SCOOPS DA according to the agreement MINFI NO 06/250 / CF OF 16
January 2012 AND THE DECISION OF COBAC NO-D-2012/31, In
accordance with the law 92/006 and relating to the cooperatives of savings and
credit regulating the micro finance sector in Cameroon to see the day. Its
registered capital is 250 000 000 FCFA, its General Management is in Yaoundé
at the Central Market (SHO), and has several agencies in the national territory
such as: NKOLDONGO; MIMBOMAN; BIYEM-ASSI DOUALA and very
soon BAFOUSSAM.

Operation of the agency.

          In order to create an environment favorable to the productivity of the
company and the happiness of its customers, the SCOOPS DA proposes a
hierarchy of powers where the functions and positions are clearly defined
around a hierarchical authority including:
The agency head
He coordinates the activities of the agency, and his role is to:
• Convey and chair meetings;
• Granting special overdrafts (overdrafts of less than CFAF 100,000 are
granted by the latter for reasons of speed of service);
• Ensure the proper functioning of the structure as well as the achievement
of the objectives set by the general management.
The secretariat
            Placed under the authority of the head of agency, it is held by a secretary
whose role is:
• Enter the different meeting reports;
• Classify the important and confidential documents of the company;
• Manage phone calls.

Accounting service
               Placed under the authority of the head of agency, it is composed of a
head of department and an assistant accountant. He takes care of:
• Pointing of operations, which consists of comparing accounting
documents received from the cash register and those posted by the
computer system at the end of the day?
• The establishment of the daily cash budget;
• The accounting management of personnel payments;
• Accounting for miscellaneous transactions.
 IT department
               He monitors and controls the operations, organizes the work
automatically, produces the financial statements periodically, ensures the proper
functioning of the structure's IT system, as well as the image of the company via
social networks.

The marketing department

               He is responsible for managing the SCOOPS DA customer files,
providing customer orientation and information. He is also responsible for the
design, promotion and dissemination of products and services of the business.
For this purpose, it is responsible for establishing a marketing plan according to
the objectives assigned to it by the general management through the head of
agency. He is assisted by a team of salesmen and collection agents.

The credit service

               It is responsible for analyzing all credit files reached at the level of the
agency, to provide information on the type of commitment made at the time; the
granting of credit for the operation of a project. It aims to limit the risks that
revolve around a credit transaction, in order to transmit the file to the credit
committee for validation.
Operations Management Service
               He manages client accounts, ensures the accuracy and regularity of the
entries in the accounts, manages the treasury of the company, and ensures the
proper functioning of the fund.

General control
               He oversees the application of internal and external regulations to the
company, prepares the dashboard; ensures the financial functioning of the
structure.
Organization and services offered
I-Organization
             The organization refers to the devices by which a company organizes,
distributes and controls its activities. To do this, the company puts in place an
organization chart that will define each job and the different specific tasks: it is
the structure of the company. At this level, we distinguish:
• The general Assembly;
• Board of directors;
• The general direction,
• The credit committee.
      The General Assembly
                 It brings together all the members (shareholders) and is the body of
deliberation and decision of the institution.
     The Board of Directors
                 It is the decision and management body of the company. Only the
General Assembly can limit its powers within the framework of the law and
statutes. It is at this level that the general manager is appointed.
The General Management
                 It is headed by a managing director who carries out his duties under
the authority and control of the board of directors. He represents society all
inside and outside; takes care of recruiting staff in accordance with the
legislation in force; proposes management strategies to ensure the development
of the company.

The credit committee

                 This service is essentially made up of credit experts who, after
receiving credit application files, proceed with the processing while completing
certain failures that have occurred at the level of the agency. The latter may
question the decisions taken at the agency such as the amount granted, the
delay, the guarantees, and recommendations to validate the file that will lead to
the effective implementation of credit.

II-SERVICES OFFERED
The SCOOPS DA was created to provide proximity financial services
to those without access to conventional banks so that each customer finds
satisfaction in a product that meets their needs. Thus, we distinguish:
• TRADITIONAL BANKING SERVICES
            It is the set of services offered by a bank or an MFI to these customers in
order to better retain them and follow their financial movement. As such, we
can have:
• Daily account
      It is a sight deposit account that allows the customer to save day-to-day and
this at his place of service with a collector and can get his money when the time
comes to the agency cashier where with his collector.
            The conditions for opening a Daily account are:
• Opening costs: 0 FCFA
• CNI photocopy;
• Two 4x4 photos;
• Telephone number;
• Reliable address;
• Minimum at the opening: 500 to 1000 FCFA;
• Minimum in account: 0 FCFA;
• Minimum payment: 500 FCFA.
 • The savings account
           It is a sight deposit account in a bank, or similar organization, which pays
interest (fortnightly) and generally does not allow it to be used to make
payments directly. It opens as follows:
• Opening costs: free
• Two 4x4 photos;
• CNI photocopy;
• •Location Plan;
• Minimum at opening 10,000 FCFA.
• The savings account association or tontine
 This is a typology of savings account reserved for associations that need to
secure their funds. Exhibit for opening:
• Two 4x4 photos, photocopy of the INCs, of each agent;
• Opening costs: free;
• Association status;
• Minutes of the meeting;
• Location Plan;
• Minimum at opening 15,000FCFA.
• The official salary account
           This account is reserved for employees whose salary transfer is made in
the account so that they can take possession of their monthly remuneration. The
parts to provide for the opening are:
• Opening costs: free;
• Minimum opening: 1st transfer
• Two 4x4 photos, Photocopy of the CNI;
• 03 latest pay slips;
• Customer request;
 • Location Plan.
• The account of the pensioners of the CNPS
            The opening procedures are the same as the official account, except for
the presentation of the pay slip and the client's request.
• The private cheque account
     The opening conditions are the same as those of the savings account,
with the only difference being that the minimum for opening is 50,000 FCFA.
• The individual company current account
            It is an account reserved for companies and establishments that wish to
carry out transactions with their suppliers. The opening conditions are as
follows:
• Two 4x4 photos;
• Photocopy of the manager's CNI;
• Photocopy of the title of the license;
• Location Plan ;
• The photocopy of the business register;
• Minimum for opening 200 000FCFA.
• In the case of S.A.R.L, in addition to the requirements of the individual
company current account, the legalized status must be added.
• For the S.A, in addition to the conditions enumerated above, it is also
necessary the act of delegation of power.
• INVESTMENTS
• Term Deposits (DAT)
            These are financial investments, paid and secured. The customer here
undertakes to leave at the disposal of the company (SCOOPS DA) through an
account and for a defined period, a certain sum producing interest.
            This investment formula is reserved for legal and natural persons at a
negotiable rate of remuneration. The subscription conditions are as follows:
 • Minimum deposit: 1,000,000 FCFA
• Minimum duration: 06 months
Cash voucher
                   It is a security issued by an MFI or the bank in recognition of the
debt to the subscriber to whom it promises through this title to repay at a given
date the funds to the interested party. Indeed, it is the title that the customer
receives that materializes its assets with the MFI or the bank. At SCOOPS DA,
the minimum duration is three (03) months, minimum deposit 500,000 FCFA.
• FINANCING
The SCOOPS DA is a financial institution serving its customers. In this
regard, it has set up a simplified credit granting procedure such as:
• Cash facilities: they allow the account holder to deal with short-term
cash flow difficulties;
• Overdrafts: these are credits granted to the account holder who are
waiting for a cash flow;
• School loans: these are loans granted to individuals to better prepare
their children to go back to school;
• Financing markets etc.
• RELATED SERVICES
It is the set of services that a MFI practices as an accessory. That is to
say within the limits set by COBAC. The SCOOPS DA cares for the well
being of its customers, offers services such as:
• Micro-assurance: this is the adaptation of the insurance service to
mainly low-income customers; not having access to conventional
insurance services. Thanks to its partner NSIA insurance, the SCOOPS
DA allows its customers to subscribe to a life insurance, through the
opening of their bank account;
• The sale and exchange of currencies;
 • Traveler's check (this is an operation that consists of the MFI purchasing
from banks for the needs of the clientele);
• Money transfer (national and international by western union), and many
others.

CHAPTER THREE
METHODOLOGY AND INTERNSHIP ACTIVITIES

This chapter describes the methodology used for the study. The main
issues discussed here are the research design, research population, sample and
sampling technique, source of data and data collection method of data analysis
and the internship activities. A research design that combines both qualitative
and quantitative methods of questionnaire and interviews in order to examines
the research question was adopted and concludes with the field reflection of the
study

3.1 RESEARCH DESIGN

The design employed in this research was a descriptive research design

with the use of a survey. According to Denzin and Lincoln (2014), research
design is the plan and structure used to analyze the subject matter under study
and whose purpose is to answer the research questions. A descriptive research
design tries to describe the state of affairs as it is at present survey is concerned
with particular characteristics of specific population of subject either at a fixed
point in time or varying time for comparative purpose (Evans & Denzie, 2013).
According to Gaylord and Galliher (2013), descriptive research design has on
advantage over causal research design in that it seeks to answer the “what”
question rather than the “how” when and why. The disadvantage of descriptive
research design over causal research design is that the association between
cause and effect may not be as clear which could lead to wrong inferences being
drawn by the research. A questionnaire was administered to 30 employees and 4
members. The sample included both male and female.

3.2 SITE OF STUDY

This research was carried out at SCOOPS-DA branch situated at Lycee

biyem-assi opposite impots Yaoundé Cameroon.

3.3. POPULATION SIZE

According to Denzin and Lincoln (2014), the population in a study is the

collection of people or elements onto which a measure is subjected in order to
make inferences. The target populations were all employees of AWICCUL
specifically obili branch Yaounde and some member who have taken a loan as
of January 2019 till date which made up a total of five employees and five
members both males and females and they are people of different academic and
professional qualification. The population of our study is made up of 5 workers
and 5 members with different ages and religious background.

3.4. SAMPLE SIZE

Sample size refers to the number of units or people that are chosen from
which the researcher wish to gather information or data(Evans et al.,2000).since
the population was not that large, the sample size was not determine instead the
entire population was considered to be the sample size since interviewing the
entire population was possible

3.5. SAMPLING TECHNIQUE

The sampling technique is the process of selecting the specific

methodology to use in deciding the entities in the study (Elliot and Willingham,
2010).simple random sampling is the key to obtaining a representative sample
since every sample of a given size in the population has an equal chance of
being sampled. This technique will help to get the highest number of
respondents.

3.6 SOURCES OF DATA

The method used to collect data for this work includes primary and
secondary data. The primary data involves interviews, questionnaires and
observation. While secondary data method of collecting data involves internet
and text books.

3.6.1 Primary Source

Primary data was obtained from the field by the researcher from the staff
of AWICCUL, the study also made use of questionnaires, interviews and
observation. The questionnaires were addressed to the staffs of the corporation
and the interview was address to the members of the corporation. The use of
questionnaires allowed us to collect large amounts of data in a relatively short
time.

3.6.1.1 Questionnaires
 A questionnaire is a form containing a list of questions; a means of
gathering information for a survey. It should be noted that the questionnaires
were the same for all the respondents.

3.6.1.2 Observations

The way loans were treated by the employees was closely observed in
order to know how loan interest was treated. Also, the reaction of members
toward the implementation

3.6.2 Secondary Source of Data Collection. Durring the research we

also made use of secondary data, the reason for using the secondary data was to
enable us get part of our information on what others have written on concerning
this topic examples like internet.

The oxford advance dictionary was also used to look for the meaning of
some difficult words and definitions which was important to the work. The
researcher gathered information from the internet on the Impact of Financial
Statement on Investment decision making.

3.7 VALIDITY AND RELIABILITY OF RESEARCH INSTRUMENTS.

The instruments which were both primary (questionnaires) and

secondary (internet) were all valid and reliable for the study.

3.7.1 Validity of research instruments.

Validity is the significance of inference and their accuracy that are

normally based on the results of a research. The primary instrument
(questionnaire) was prepared by the researcher to the employees of NC4D. The
questionnaire that was administered was well cross checked by the supervisor to
ensure its face and content validity. It was also pre-tested with random
participants from SIANTOU UNIVERSITY INSTITUTE to make sure it was
well understood by respondents. Remarks from respondents were also observed
to achieve validity.

3.7.2 Reliability of research instruments.

Reliability refers to the consistency of a set of measurement units (Hair,

Bush,& Ortinau,2000).it can also be the degree of measurement of an
instrument to which an instrument when subjected to the same conditions using
similar objects. The sources of response were reliable as the primary
instruments were prepared and carried to the corporation by the researcher
herself who took time to explain to the respondents on how to answer the
questions. Just as the primary sources were reliable so were the secondary
sources as books were gotten from NC4D to bring out relevant information
needed for the study.

3.8. POSITIVE AND NEGATIVE ENCOUNTERED DURING THE

INTERNSHIP
• Positive encountered
The following are the positive encounters that the researcher
encountered during the internship;
• Every personnel were open to teach and help interns understand what is
expected of them when executing any given task.
• Due to the limited staffs, interns were given much more responsibilities
thus giving us the advantage of having extensive knowledge and practice
on the way in which to manage accounts, convince customers purchase
our services, daily collection as well as many other aspects linked to the
financial system.
• Going out every morning and learning something new helped build up
behavioral attitudes of punctuality, team spirit, respect of others and
authorities as well as learning the importance of job well done.
 • Lastly because SCOOPS-DA was a bilingual place but more of French
speaking, the researcher learnt many accounting terms in French and also
how to interact well with both workers and customers in the French
language

• Problems encountered during the internship

The following are the negative encounters the researcher encountered
during the internship;
• The lack of any sort of remuneration made it quite problematic
financially to meet up cost of transportation and feeding during the
working days especially as we were also expected to work half day at
times on Saturday and public holidays.
• The weather conditions at which we went on field work. When its rainy,
the rain will hinder us from carrying on our field work or running errands
for the personnel’s.
• Also the fact that there was no dry cleaner in the office was really a
problem because we the interns had to create time during working hours
to clean the office.
• Moreover there was no air conditioner in the office, whereby during
periods of much heat we find interns and workers fanning themselves
because of the heat.
• Lastly, there we shortages of chairs at the office, due to the fact that they
were many interns as well as workers, you find some interns standing
because of that problem
 CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

As far as identification of respondent is concerned, The researcher

administered questionnaires to the staff of SCOOPS-DA of the organization to
get their opinion on the role financial management has in taking investment
decisions. Out of 40questionnaires distributed to staffs, only 30 were collected
from the staff. So the administration of data collected shall be based on
30questionnaires that shall be examined.

Table 3: Gender of respondents

 Respondents Frequency Percentage
Male 10 40%
Female 20 60%
Total 30 100%

Figure 2: Distribution of sample according to sex

Survey 2019
From the table3 and figure 2 above we can see that out of the population
under study 60% are females and 40% are male.

Table 4: Distribution of sample according to age of respondents

Respondents Frequents Percentage
20-30years 7 23.33%
30-40years 6 20%
40-50years 5 16.67%
50years and above 12 40%
Total 30 100%
Figure 3: Distribution of sample according to age of respondents

Survey 2019
From the above figure 3 and table 4 we can see the respondent from that
most of the people that in the organization are 50 and above. That is the
organization will prefer to work with aged people than the youths because they
are experienced than the youths and manage the company very well so as to be
able to achieve the company set objective.

Table 5: Distribution of sample according to marital status of respondents

Respondents Frequency Percentage

Single 20 66.67%
Married 10 33.33%
Total 30 100%

Figure 4: Distribution of sample according to married status of

respondents

Survey 2019
From table5 and figure 4, we can interpret that there are more unmarried
people than married in the organization. That is to say that they organization
prefer unmarried people than married.
Table 6: Distribution of sample according to position held of respondent

Respondents Frequency Percentage

Manager 15 50%
Accountant 10 33.33%
Service operator 5 16.67%
Total 30 100%

Figure 5: Distribution of sample according to the position held of

respondent

Survey 2019

Table 7: Distribution of sample according to longevity in service of

respondents

Respondents Frequency Percentage

1-2years 7 23.33%
 2-4years 6 20%
4-8years 5 16.67%
Above 8years 12 40%
Total 30 100%

Figure 6: Distribution of sample according to longevity in service of

respondents

Survey 2019
From the figure 6 and table7 above we can notice that most of the
employee of SCOOPS-DA have been working in the organization for a long
period of time and they have a mastery of the activities in the company and the
range in between 2-10years.

Table 8: Financial Statements influence investment decisions

Repondents Frequency Percentage

Stronglyagree 14 46.66%
Agree 5 16.66%
Netrual 5 16.66%
Stronglydisagree 2 6.66%
Disagree 4 13.33%
Total 30 100%

Figure 7: Financial statements influence investment decisions

Survey 2019
From the table8 and figure 7 above, we can notice that 46.66% of the
respondents strongly agree that financial statement influence investment
decisions, 16.67% of the respondents agree that financial statements influence
investment decisions, 16.67% of the respondents are neutral that financial
statements influence investment decisions, 6.66% strongly disagree financial
statements influence decision making, 13.33% disagree that financial statement
influence decision making.
Table 9: Your Company prepares income statement and balance sheet
monthly

Respondent Frequency Percentage

Strongly agree 7 23.33
Agree 6 20
Neutral 8 26
Strongly disagree 4 13
Disagree 5 16.67
Total 30 100

Figure 8: Your Company prepares income statement and balance sheet

monthly

Survey 2019
From the above figure 8 and table 9, we notice that 23.33% of the
respondents strongly agree that the company prepares income statement and
balance sheet monthly, 20% of the respondents agree that the company prepare
income statement and balance sheet monthly, 26% of the respondents are
neutral that the company prepares income statement and balance sheet monthly,
13% of the respondents strongly disagree that the company prepares income
statement and balance sheet monthly, 16.67% of the respondents disagree that
the company prepares income statement and balance sheet monthly.
Table 10: Your Company keeps accounting recordings as well as financial
statements.

Respondents Frequency Percentage

Strongly agree 9 30%
Agree 7 23.33%
Neutral 10 33.33%
Stronglydisagree 2 6.66%
Disagree 3 10%
Total 30 100%

Figure 9: Your Company keeps accounting recordings as well as financial

statements

Survey 2019

From the above figure 9 and table10, we notice that 30% of the
respondents strongly agree the company keeps accounting recordings as well as
financial statements, 23.33% of the respondents agree the company keeps
accounting recordings as well as financial statements, 33.33% of the
respondents are neutral the company keeps accounting recordings as well as
financial statements, 6.66% strongly disagree the company keeps accounting
recordings as well as financial statements , 10% of the respondents disagree the
company keeps accounting recordings as well as financial statements.

Table 11: Your Company prepares cash flows monthly

Respondents Frequency Percentage

Strongly agree 5 16.66%
Agree 4 13.33%
 Neutral 14 46.66%
Strongly disagree 4 13.33%
Disagree 3 10%
Total 30 100%

Figure 10: Your company prepares cash flows monthly

Survey 2019
From the above table 11 and figure 10, we realize that 16.66% of the
respondents strongly agree that the company prepares cash flows monthly,
13.33% of the respondents agree that the company prepares cash flows monthly,
46.66% of the respondents are neutral that the company prepares cash flows
monthly, 13.33% of the respondents strongly disagree that the company
prepares cash flows monthly, 10% of the respondents disagree that the company
prepares cash flows monthly.
Table 12: Financial statement minimized the cost of recording and
interpretation of data.

Respondents Frequency Percentage

Strongly agree 10 33.33%
Agree 10 33.33%
Neutral 6 20%
Strongly disagree 2 6.67%
Disagree 2 6.67%
Total 30 100

Figure 11: Financial statement minimized the cost of recording and

interpretation of data.

Survey 2019
From the above table 12 and figure 11 above we realize that 33.3% strongly
agree financial statement minimized the cost of recording and interpretation of
data 33.3% agree, 20% are neutral 6.67% strongly disagree and 6.67 disagree
financial statement minimized the cost of recording and interpretation of data.
Table 13: Financial statement contributes in the quality control.

Respondents Frequency Percentage

Strongly agree 4 13.33%
Agree 4 13.33%
Neutral 16 53.33%
Strongly disagree 3 10%
Disagree 3 10%
Total 30 100%

Figure 12: Financial statement contributes in the quality control.

Survey 2019
From the above table 13 and figure 12 above we realize that 13.33% strongly
agree that financial statement contributes in the quality control, 13.33% agree,
53.33% were neutral, 10% strongly disagree and 10% disagree that financial
statement contributes in the quality control.
 CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

The chapter gives a valid summary and conclusion of the research work
as well as recommendations to the readers and users of this work and to the case
study of the organization.

5.1 SUMMARY OF FINDINGS

The aim of this study is to assess the impact of financial statement on
investment decisions in an organization. The data used are collected mainly
from primary sources and secondary sources. A financial statement is a
summary of financial position of a business during a certain period of time. The
result shows that most organizations do not use financial statement to make
investment decisions. It is of importance because financial reporting will
influence the institutions growth in the long-run. Therefore, financial reports in
SCOOPS-DA Yaoundé are prepared monthly. This is because in this institution
only 3 people such as the accountant, the branch manager and the assistant
branch manager oversee financial reporting and they also have the access and
knowledge of preparing financial statement.
Finally, financial statements mostly prepared in SCOOPS-DA are the
income statement and the balance sheet and their annual budget. The income
statement as seen in the appendix shows the institutions expenses and revenue.
While the balance sheet shows the organizations assets liabilities and equity and
lastly the annual budget which gives an overview of the constitutions total cash
that came and left the organization

5.2 CONCLUSION
Summary reports are useful to the extent that they provide an overall
picture of a company’s financial position, but investment decision makes the
ability to gain a deeper understanding of the company’s economy and this can
only be achieved upon obtaining disaggregated information of the primary
financial statement. This research work was only limited to the SCOOPS-DA
Yaoundé. This research can really be effective if the other entire organizations
were covered together proven that financial statements do play a role in the
investment decisions of an organization. With financial reports considered and
interpreted rightly in these organizations, then for sure its businesses will tend
to improve the economy. But it is quite impossible to study as it will make the
work vast and unfocused. As such the sampling technique has made it possible
for such problems to be avoided. A critical assumption in the use of the
financial statement is often made that the past will predict the future. For trends
to have continued for many years, this will usually be true at least for the near
future. Looking at the financial statement of the organization presented in the
appendix one can say that there is no doubt that financial statements do promote
the growth of investment decisions in the organization which will be to the
company’s advantage such as an increase in it possessions as shown in the
balance sheet, income statement and the annual budget. SCOOPS-DA Yaoundé
is continuously rising more furniture and computers and other machines because
of its effective use of financial statements which gives an overview of its
performance.
This research therefore brings us to accepting that financial statement has a role
to play on investment decisions in micro-finance institutions.

5.3 RECOMMENDATIONS
Through my training in SCOOPS-DA, many problems were mentioned
and solutions have been given to these. Some recommendations could be done
to ameliorate the smooth of financial statements. The objective of every
organization is to gain more and minimize cost.
Firstly, the researcher will want to recommend the users of this research work,
to extend and expand their scope of study into other regions of the country, and
to other organizations within the Central Region. In addition, the organization
where the researcher worked had a limited space for offices but more staffs
instead. The offices available could not contain all of them, so the researcher
will encourage that the institution add more offices. The organization should
also do a further research so as know more about the role financial statement
plays in their growth not only on investment decisions but on different
important economic decisions as well.
Finally, organizations that do not use financial statements should try to
use one and learn how to prepare them. This is because, from the above analysis
and results obtained from this research, it is certain and proves that financial
statements do play a role in the investment decision of an organization. With
financial reports considered and interpreted rightly in these organizations, then
for sure its business will lead to improve on higher margins.

REFERENCE

Chaipetta, B., Shaw, K. & Wild, J. 2009.Principles of Accounting, Mcgraw –

Hill/Irwin, 19th Edition.
Companies, allied matters to quantitative information of financial nature.1990
Elton, E.J., Gruber, M.J., Brown, S.J. & William N. 2013. Investment Analysis,
8th Edition. Paperback: John Wiley & Sons, 2010.
Ittelson, T.R.1998. A Step-by-Step Guide to Understanding and Creating
Financial Reports. Franklin Lakes, NJ: Career Press
Lasher, W.R. 2008. Financial Management, 5th Edition. South-Western
Publishing Co.
Morning Star.Introduction to Financial Statement, John Wiley & Sons. 2010
Nicoline, Y. 2013. The Importance of financial statement, A Research Project at
National Polytechnic Bamenda.
SCOOPS-DA Finance Brochures.2012/2013.On past financial statements and
information on the different branches in Cameroon.
Wood, F. 2005. Business Accounting 1.Financial Times Management,
Avaxhome 10th Edition.
 APPENDICES
APPENDIX 1: ORGANISATIONAL STRUCTURE AND DIAGRAM

GENERAL ASSEMBLY OF MEMBERS

BOARD

General manager

Ass General manager

G ADMISTRATION
• Secretary

• Driver

• cleaner

Credit committee

FINANCE AND ACCOUNTANT

MARKETX
HRM
CONTROL

BRANCH MANAGER

LENDING OFFICE
ACCOUNTANT

CUSTOMER SERVICE
TELLER

APPENDIX 2
Section A: Demographic information

Indicate your choice by a tick in the box

 • Gender: MaleFemale

• Age: 20-30 30-40 40-50 Above 50

• Marital status: SingleMarried

• Highestlevel of education:
Diploma Bachelor Master PHD

• Position held: Manager Accountant Member service

operator

• Duration in service: 1-2 2 -44-8Above 8

Section B.
Specific questions concerning the research. Please tick where necessary
with your appropriate answers to the following questions.
Rate your response on a scale on 1 to+

Questions Strongly
Strongly Agre
Neutral Disagre Disagree
Agree e
e
Financial Statements affect
investment decisions
Your company prepares
income statement and
balance sheet monthly
Your company keeps
accounting recordings as
well as financial statements
Financial statement
contribute in the quality
control
Financial statements help
your company in making
investment decisions
Your company prepares
cash flows monthly
Financial statement
minimized the cost of
recording and interpretation
of data

Questions Strongl Agree Neutral Strongly Disagree

y agree disagree
Financial statement perform
work very fast
It stores and retrieve
information easily
Financial statements makes
information more credible
and understandable
Financial statement helps
management to take timely
decision
Financial statement provides
accurate and valid
information at the right