Impact of Financial Statements On Business Decision Making in Nigeria

CHAPTER ONE
1.1 BACKGROUND TO THE STUDY
Decision making is an important part of business daily life. It is one of the main functions or
tasks of management in any organisations. Decision making is defined as a choice competing
among alternatives and the implementation of the chosen alternative. Decision making is a
fundamental function of the management (Grant, 2011). Using a step by step decision making
process can help management make more deliberate and thoughtful decisions by organizing
relevant information and defining alternatives. Decision is made at every level of management so
as to ensure that business goals are achieved. Decision making is considered the backbone of
business management because without taking the right decision at the right time, nothing can be
performed. It reflects the success and failures of managers and the organisation mainly hinges
upon quality of decisions.
Financial statement can be defined as a summarized report that indicates a company’s operating
data during a period or economic standing at a given period (Benedict and Elliott, 2011). It is
also defined as financial reports which contain information relating to the financial activities of
an organisation. Every business organisation prepares financial statements which consist of
statement of comprehensive income, statement of financial position, statement of cashflow,
statement of changes in equity and notes to financial statement. The statement o comprehensive
income is used to ascertain the net result of financial working of the business whether it has
earned profit or sustained loss. The statement of financial position is prepared to find out the
business’s financial position at the end of the financial year. A schedule of current assets and
current liabilities of two years maybe prepared to know the changes in the working capital.
Similarly, a fund flow statement and cashflow statement may also be prepared to know the future
estimate of cash receipt and payment. The financial statement reveals reveals the financial
strengths and weaknesses of a firm. According to Aguolu (2010), financial statement need to be
interpreted for a better understanding and analysis and it can be thus be interpreted using
individual items contained in the financial statement or/and using ratios computed from items
contained in financial statement.
Any business that wants to survive must make right business decision. Recently, management
requires a wide variety of information to successfully accomplish business aims and objectives.
Accounting information in the financial statement helps to understand the accurate financial
situation which aid effective decision making. Financial statement can aid decision making by
providing information relevant to the decision which helps the organisation to excel in its
business. Making the right business decisions depend on the possession of appropriate, accurate
and up to date financial information provided and presented in a meaning way.
1.2 STATEMENT OF PROBLEM
Basically, financial Statement provides information that will help organisations to make
informed decisions so as to minimize loss, make efficient investment decision, achieve
competitive advantage and make profit (Ahlam, 2016). Most organisations both profit and non-
profit making organisation prepare financial statement which guides them in their business
decisions. The financial statements consist of statement of comprehensive income, statement of
financial position, statement of cashflows, statement of changes in equity and note to the
financial statements. Irrespective of the financial statements prepared, many organisations still
face business decision challenges in areas of achievement of meeting up in frequent change in

business activities and business competition (Khawla, 2016). This is evidenced by the rate of
business closure and poor performance among the business organizations in Nigeria. It is on this
worrying situation that the researcher wants to investigate the impact of financial statements on
business decision making in Nigeria.
1.3 OBJECTIVES OF THE STUDY
The main objective of the study is to ascertain the impact of financial statements on business
decision making in Nigeria.
1. determine whether there is a relationship between financial statements and business
making.
2. ascertain the impact of financial statements on the decision making of business
organisations.
3. ascertain whether there are obstacles to the effective use of financial statements for
business making.
1.4 RESEARCH QUESTIONS
These research questions were developed for the study.
1. What is the relationship between financial statements and business decision making?
2. What is the impact of financial statements on the decision making of business
organiations?
3. Are there obstacles to the effective use of financial statements for business decision
making?
1.5 RESEARCH HYPOTHESES
These research hypotheses were formulated for this study.

1. Ho: There is no significant relationship between financial statements and business
decision making.
H1: There is a significant relationship between financial statements and business decision
making.
2. Ho: Financial statements has no significant impact on the decision making of business
organisations.
H1: Financial statements has a significant impact on the decision making of business
organisations.
3. Ho: There are no obstacles to the effective use of financial statements for business
decision making.
H1: There are obstacles to the effective use of financial statements for business decision
making.
1.6 SCOPE OF THE STUDY
This study focused on the impact of financial statements on business decision making in Nigeria
by using Medium Scale Enterprises as case study. However, the researcher used Emenite
Nigeria Limited in Enugu Metropolis due to the time frame for the study.
1.7 LIMITATION OF THE STUDY
This research work is limited to the impact of financial statements on business decision making
in Nigeria. It is also limited to the relationship between financial statements and business
decision, ascertaining the impact of financial statements on the decision making of business
organisations and ascertaining whether there are obstacles to the effective use of financial
statements for business making.

1.8 SIGNIFICANCE OF THE STUDY
At the completion of the study, the findings will be of great importance to management of
business organisations in terms of the effect of financial statements on business decision making.
It will be of great help to investors as to how to make a good investment decisions.
It will also be useful to students of accounting and other related courses for academic and
research purposes.
This study will equally serve as a reference to researchers who maybe interested to embark on a
research that relates to this topic.
It will also contribute to the body of literature or knowledge.
1.9 DEFINITION OF TERMS
Financial Accounting: It can be defined as a means of collecting, summarizing, analyzing and
reporting information about a business in monetary form (Anthony and Breitner, 2013). It is the
art of recording, classifying and summarizing in a significant manner and in monetary terms,
transactions and events which are usually of financial character.
Decision Making: Decision making can be defined as identifying, evaluating such alternatives
and choosing from such alternatives. It is the act of making a choice among available alternatives
(Panpatte and Takale, 2019). It can be viewed as the very fabric of which organized activity is
made.
Financial Statement: It can be defined as a complete set of financial and accounting documents
that allow a fair picture of the financial position, performance and treasury of a company at the
end of the period (Sami, 2012). It is a formal record of the financial activities of a business,
person or other entity.
Management: Management can be define as the planning, organizing, leading and controlling
of human resources and other resources to achieve organisational goals efficiently and
effectively (Jones and George, 2018). It is the process by which business systems are
administered.
REFERENCE
Aguolu, O. (2010). Financial Accounting- A practical Approach. Enugu: Institute for

Development Studies, University of Nigeria, Enugu Campus.
Ahlam, Q. (2016). The Role of Financial Statements Analysis in Financial Decision Making: A
case Study of Greater Mills Corporation of South Omash. Faculty of Economic and Commercial
Sciences and Management Sciences, University of Mohamed Khedr Biskra, Algeria.
Anthony, R. N. & Breitner, L. K. (2013). Core Concepts of Accounting (11th ed.). New York
City, NY: Pearson.
Benedict, A. & Elliott, B. (2011). Financial Accounting- an Introduction (2nd ed.).
Grant, R. (2011). Rational Choice. Cambridge, MA: MIT Press.
Jones, G. R. & George, J. M. (2018): Contemporary Mangement (10th ed.). New York: McGraw-
Hill Education.
Khawla, A. (2016). Contribution of Financial Budget Analysis to Financial Decision Making:

Case study of the Sonelgaz Foundation-Biskra. Faculty of Economic and Commercial Sciences
and Management Science, University of Mohammed Khedr Biskra, Algeria.
Panpatte, S. & Takale V. D. (2019). Decision Making Process in an Organisation for its
Effectiveness. The International Journal of Business Management and Technology, 3(1), 2581-
3889.
Sami, L. M. (2012). Financial Analysis of Financial Statements according to the financial

accounting system. Faculty of Financial management, University of Mentouri Constantine,
Algeria.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 INTRODUCTION
This chapter is all about literature review which includes conceptual review, theoretical
review, empirical review and review summary. The conceptual review includes definition of
financial statement and its types, organizational decision making, purpose of financial
statements, attributes of a good financial statement, elements of financial statements, the
quality and importance of financial statements, users of financial statements, value of
accounting information system, financial statement and business decision making. The
theoretical review to be considered in this chapter includes stakeholder’s theory and decision
usefulness theory. The empirical review will look into previous works of various researchers
on related issues of financial statements and business decision making.
2.2 CONCEPTUAL REVIEW
In this conceptual review, the nature, attributes, element, importance, types and users of
financial statements will be considered. It will also considered business decision making,
value of accounting information system and financial statement and business decision
making.
2.2.1 FINANCIAL STATEMENTS
Financial statement refers to a summary explaining or providing a picture of the financial
position, performance and activities of a business during a certain period of time (Atrill and
Malaney, 2015).Financial statement can be defined as a statement which conveys to
management and to interested outsiders a concise picture of the profitability and financial
position of a business (Duru, 2012). It is a written report that summarizes the financial status
of an organization for a stated period of time. Furthermore, financial statement is a
mechanism of communicating to all interested parties such full information on the resources,
obligations and performances of the reporting enterprise.
Financial statement of companies are prepared either by using generally accepted accounting
principles (GAAP) defined by the law on accounting and the law on financial statement or
using the international financial reporting standards (IFRS) and international accounting
standards(IAS). Financial statements indicate the profitability or loss of a business
organization by matching incomes and expenditure to arrive at a deficit, surplus or
breakdown via the income statement. The basic content of financial statements includes the
following;
2.2.1.1 STATEMENT OF FINANCIAL POSITION
The statement of financial position provides a true and fair view of the company’s financial
position as at the end of the period. It shows the assets owned by the company, liabilities
owned by the company and shareholder’s funds in the company as at the end of the period. It
was formally called balance sheet.
2.2.1.2 STATEMENT OF COMPREHENSIVE INCOME
The statement of comprehensive income formally known as trading, profit or loss account
covers a stipulated period of time. It presents the company’s revenue and expenditure for a
product. It equally shows the profit or loss generated from the business during a given period
of time. It shows the result of the operations of the company for the reporting period.
2.2.1.3 STATEMENT OF CASHFLOW
A statement of cashflow provides the information on the sources of cash inflows into the
organisation and the utilization of cash (cash outflow) by the organisation. This statement
enables users of financial statement to access the company’s liquidity and short term
viability. It represents a company’s power in fulfilling timely obligations and how to enter
and exit cash in company (Sadeghird 2015).
2.2.1.4 STATEMENT OF CHANGES IN EQUITY
This is a statement that reflects information about the increase or decrease in net assets or
wealth. It shows the changes in a company’s equities at the end of the period.
2.2.1.5 NOTES TO THE FINANCIAL STATEMENT
These are usually explanatory notes to the accounts that give reasons for the figures and
information contained in financial statement. It must be provided in a systematic manner and
cross-referenced from the face of the financial statements to the notes.
2.2.1.6 VALUE ADDED STATEMENT
This statement reports the wealth created by the company and its employee’s efforts during
the period and the distribution of this wealth among various interest groups such as
employees, providers of capital, the government and the management.
2.2.1.7 HISTORICAL FINANCIAL SUMMARY
This enables an instant comparison over a period usually five years. It provides vital
information about an organization with regards to its turnover, profit before and after
taxation, dividends, asset employed, issued and paid up capital and reserves.
2.2.2 BUSINESS DECISION MAKING
Decision making in the context of business organisation is the process that leads to selecting
a string of actions among two or more selection. Business decision making always involves
making a choice to alter some existing condition. It is a process of making a choice from a
number of alternatives to achieve a desired result (Eisenfuhr, 2011). When decision is being
made by management on behalf of the business organisation, it is expending some amount of
organizational decision making. Decision making always includes uncertainty and risk.
Decision can be classified into three categories based on the level at which they occur and
they includes; strategic decisions, tactical decisions and operational decisions. Strategic
decisions set out the course of an organization. Tactical decisions are decisions about how
things will get done. Operational decisions are decisions that employees make each day so as
to keep the business running. Decision making helps to utilize the available resources for
achieving the objectives of business organisations because unless minimum financial
performance levels are achieved, it is impossible for a business enterprise to survive over
time.
Business organisations also make financial decisions which involve investment and financing
with regards to the business. Financial decisions involves how the organisation should raise
finance, invest the money raised and how the profit should be distributed. Financial decision
of business organisation includes investment decision, financing decision and dividend
decision. Investment decision is a decision concerned with how the firm’s funds are invested
in different assets. Financing decision is a decision which is concerned with the amount of
finance to be raised from various long and short term sources. Dividend decision is a
financial decision concerned with deciding how much of the profit earned by the company
should be distributed among shareholders and how much should be retained for the future
contingencies.
2.2.3 PURPOSE OF FINANCIAL STATEMENTS
The objective of financial statements is to provide information about the financial condition,
results of operations and financial compatibility of a business unit that is useful for a wide
range of users in making economic decisions. Financial statements prepared for this purpose
cover the public needs for majority of users. However, the financial statements may not
provide all the information that the users require for economic decision because financial
statements provides largely the work of financial past events and does not necessary provide
non-financial information (Hermati and Mostafapour, 2015).
It is necessary that information about the results of operations is useful for predicting the
entity’s capacity to maintain cashflows from the entity’s existing resources. The general
objective of financial statements is to provide information that expresses the financial effects
of transactions, operations and financial events affecting financial condition and operations’
results of a profit unit for the use of internal and external users (Farsad and Tirandaz, 2011).
2.2.4 ATTRIBUTES OF A GOOD FINANCIAL STATEMENT
The conceptual framework on qualitative characteristics deals with the attributes that make
the information provided in financial statement useful to the users (BDO 2010). According to
IFRS (2010), published financial statement should possess the following qualities;
2.2.4.1 RELEVANCE
Financial statement is used by the interested parties in making economic decisions thus the
information provided should be capable of been used for such decisions. Financial
information is capable of making a difference in decisions if it has a predictive value,
confirmatory value or both. FASB (2010) citied that financial information with productive
value is employed by users in making their predictions. Relevant information is capable of
making a difference in the decisions made by users of financial statement.
2.2.4.2 FAITHFUL REPRESENTATION
Faithful representation means that information from financial statements must faithfully
represent the transactions and other events that it purports to represent in both numerical and
narrative form. Financial statement must be presented in a faithful manner without leaving
some indistinct areas. For information to be faithfully represented, it must possess the
following features; neutrality, completeness and free from material error.
2.2.4.3 COMPARABILITY
Comparability is the qualitative characteristic that enables users to identify and understand
similarities and the difference among items. It does not relate to single item. It enables
information about an entity to be compared with similar information of previous yield and
similar information of other entities. The consistent application of methods to prepare
financial statements helps to achieve comparability.
2.2.4.4 VERIFIABILITY
Verifiability is another enhancing qualitative characteristic which helps to assure that
information it purports to represent. Verifiability means that different knowledge and
independent observers could reach consensus although not necessarily complete agreement
that the information concern provides a faithful representation. It can also mean to verify an
amount or other representation through direct or indirect observation.
2.2.4.5 TIMELINESS
Timeliness as a feature of enhancing qualitative financial statement means having
information available to decision makers in time so as to be capable of influencing their

decisions. The users of financial statements make use of current or up to date information
more than outdated information, thus financial statements should be delivered on time.
2.2.4.6 UNDERSTANDABILITY
Understandability is another component of enhancing qualitative characteristic which entails
that information is understandable if classified and presented clearly and concisely. Financial
statement can be somehow complicated for users to understand so it should be prepared in
such a way that users will be able to understand the information content.
2.2.5 ELEMENTS OF FINANCIAL STATEMENTS
The elements of financial statements are classified into assets, liabilities, equity, income and
expenses (Ahmed 2010). The elements that are directly related to the measurement of
financial positions are assets, liabilities and equity while income and expenses are directly
related to the measurement of performance.
2.2.5.1 ASSETS
Assets refer to the resources controlled by the entity as result of past events and from which
future economic benefits are expected to flow to the entity. They are classified into current
and non-current assets. The difference between current and non-current assets is that current
assets are expected to be converted to cash within a year while non-current assets are those
that are considered long term and cannot easily be converted into cash within a year.
Current Assets: Assets are considered current if they are held with intention to be traded,
expected to be realizes or consumed within twelve months after the end of the period or its
normal operating cycle (whichever is longer). The current assets includes cash and cash
equivalents, receivables, inventories and prepared expenses and are recorded in a company’s
statement of financial position.

Non-current Assets: They are assets whose benefits will be realized over more than one
year and cannot easily be converted into cash. They are recorded in an entity’s statement of
financial position and they include property, plant and equipment, intangible assets and other
long term assets. They are capitalized rather than expensed and their value is drawn down
and allocated over the years that the asset will be in use. The asset may be amortized or
depreciating depending on its type.
2.2.5.2 LIABILITIES
Liabilities present obligations of an entity from past events, the settlement of which is
expected to result in an outflow from the entity of resources embodying economic benefits.
Liabilities maybe classified as current and non-current liabilities.
Current Liabilities: A liability is considered current if it is due within twelve months after
the end of the statement of financial position date. In other words, they are expected to be
paid in the next year. Current liabilities includes trade and other payables, current tax
liabilities, short term borrowing and accrued expenses and are recognized in the an entity’s
statement of financial position.
Non-current Liabilities: Liabilities are considered non- current if they are not currently
payable that is they are not due within twelve months after the end of the accounting period
or company’s normal operating cycle, whichever is shorter. Non- current liabilities includes
long term notes, bonds, mortgage payable, deferred tax liability and other long term
obligations and are recorded in a company’s statement of financial position.
2.2.5.3 EQUITY
Equity represents the owners’ claims to the assets in the enterprise. Equity is also known as
net assets or capital. It is refers to the residual interest in the assets of an entity after
deducting all of its liabilities. It can also be called shareholders’ funds. Equity includes share
capital, retain earnings, reserves, non-controlling interests and other components of equity
and is recognized in a company’s statement of financial position.
2.2.5.4 INCOME
Income refers to increases in the economic benefit during the accounting period in the form
of inflows or enhancement of assets or decreases of liabilities that result in an increase in
equity (other than those relating to contributions from equity participants). Income comprises
both revenue and gains and it is recorded in a company’s statement of comprehensive
income.
2.2.5.5 EXPENSES
Expenses refer to decrease in economic benefits during the accounting period in the form of
outflows or the depletion of assets or incurrences of liabilities that result in decrease in
equity, other than those relating to distributions to equity participants. Expenses includes cost
of sales , advertising expenses, rent expenses, salaries expenses, income tax, finance cost and
losses such as loss from fire, typhoon and loss from theft. Expenses are recorded in an
entity’s statement of comprehensive income.
2.2.6 THE QUALITY AND IMPORTANCE OF FINANCIAL STATEMENTS
Good financial statements provides to the management of an organisation with reliable
information which helps them to make quality decisions, organize and control business
activities. Financial statement can be processed and analyzed for different purposes and it
helps the management of organisations in the accurate solving of business problems and
issues, set goals and evaluates options and selects the optimal solution to handling the
problems and issues. In this regard, useful and effective financial information for decision
making is the most effective part in actions that will be considered in preparing the financial
statements. Financial statements are the most important information that is needed for
economic decision making by company executives (Sadeghirad, 2015).
Financial statement can also serve as a communication tool and as a means in assessing
performance (Hamdan, 2013). The role of financial statements as a communication tool is to
convey a comprehensible message to the users of accounting information about the activities
of the business organisation and the results of it. Financial statements help in assessing the
performance of management and governance on efficiency and use of resources at its
disposal, used in judging the financial position of an entity and the progress in achieving the
objectives of an entity.
2.2.7 USERS OF FINANCIAL STATEMENT
Financial statements are used by individuals and intuitions in making decisions regarding
future actions. The persons who receive accounting reports are termed the users of financial
statements. The type of information a specific user requires from the financial statement
depends on the kind of decisions that user wants to make, that is to say that financial
statement is user oriented. The users of financial statements may be grouped into two classes;
internal users and external users.
2.2.7.1 INTERNAL USERS
The internal users of financial statement are those persons or groups which are within the
organization. The following are such internal users;
Owners: The owners provide funds or capital for the organisation. They possess curiosity in
knowing in whether the business is being conducted on sound lines or not and whether the
capital is being employed properly or not. Owners being businessmen always keep an eye on
the returns from investment. Comparing the accounts of various years help in getting good
piece of information and properly kept accounts are good proofs in disputes, they determine
the amount of goodwill and facilitate in accessing various taxes.
Management: The management of an organisation is greatly interested in knowing the
position of the firm. The statements are the basis by which the management can study the
merits and demerits of the business activities. The management is interested in financial
statements so as to find out whether the business carried out is profitable or not. The financial
statement is the eyes and ears of management and facilities in drawing future course of action
and further expansion.
Employees: Employees are more concerned about the long term survival and profitability of
the firm. The payment of bonus depends on the size of the profit earned by the firm. The
demand for wage rise, bonus and better working conditions depends on the financial position
of the firm and for these reasons; the employees are interested in the financial statements.
2.2.7.2 EXTERNAL USERS
External users are those groups or persons who are outside the organisation for whom
accounting function is performed. The external users include the following;
Creditors: They are the persons who supply goods on credit, bankers or lenders of money.it
is usual that these groups are interested to know the financial soundness of a firm before
granting credits. The progress and prosperity of the firm to which the credits are extended are
largely watched by the creditors from the point of view of security and further credits. The
statement of financial position and statement of comprehensive income are nerve centers to
know.
Investor: The prospective investors who want to invest their money in a firm, of course wish
to see the progress and prosperity of the firm before investing by going through the financial
statements of the firm. This is to safeguard the investment and because of this, the investors
are eager to go through the accounting which enables them to know the safety of the
investment.
Government: The government keeps a close watch on the firms which yield good amount of
profit. The state and central government are interested to know their earnings for the
purposes of taxation. It is also essential in compiling national economy.
Consumers: This group is interested in getting the goods at reduced price, thus they want to
know the establishment of a proper accounting control which in turn will reduce the cost of
production, in turn less the prices to be paid by the consumers.
Research Scholars: The financial statement being a mirror of the financial performance of a
business organisation is of immense value to the research scholar who wants to study the
financial operations of a particular firm. To make a study into the financial operations of a
particular firm, the research scholar needs detailed knowledge of financial statements relating
to purchases, expenses, cost of material used, assets, liabilities and equity which is available
in the accounting records maintained by the firm.
2.2.8 VALUE OF ACCOUNTING INFORMATION SYSTEM
According to Hadi (2014), accounting information system is a part of a company’s
information system which helps company in providing processed information. This
processed information helps management in taking decisions that has great impact on
organisational profitability. Accounting information system produces more information to
ease operations such as planning, control information and performance. It will therefore
foster a better understanding of how business organisations are assisted to operate more
efficiently and effectively. It is concern with the provision of accounting information through
the optimum use of resources. A well-developed accounting information system enables
efficiency and accuracy for a successful business operation.
According to Patel (2015), the main function of accounting information system is to assign
quantitative value of the past, present and future business event. It traditionally focuses on
collecting, processing, analyzing and communicating financial information to external parties
such as investors, creditors, bankers and tax agencies and the internal parties such as
management and owners. It is used to refer to the interaction between people, processes, data
and technology that are used for accounting duties. Accountants should aim to provide the
right information to the right people in the right quantity, at the right time and at minimum
cost.
Accounting information system indicates an integrated framework within an entity such as
business entity that employs physical resources (material, supplies, personnel, equipment and
fund). Information is a valuable data processing that provides a basis for making decisions,
taking actions and fulfilling legal obligations whereas system is an integrated framework
within an entity where the framework is focused on a set objective. Accounting information
system transforms economic data into financial information for conducting the firms
operations and activities and providing information concerning the entity to a variety of
interested users.
Furthermore, information from financial system should direct attention to problems areas,
thus facilitating the operations of management. Accounting information must aid efficiency
and also highlight existing deficiencies. Accounting information should be of assistance in

estimating the future earning potentials of the firms and should generally disclose
information relevant to users of financial statements. Accounting information system
maintains confidentiality that is to say that it is concerned with the protection of sensitive
accounting information from unauthorized disclosure. It is useful for every business because
it gives necessary information on how to plan and prepared accounts and can make necessary
changes as and when required. Indeed accounting information is good but when is not
presented at the appropriate time, its values deteriorates.
2.2.9 FINANCIAL STATEMENTS AND BUSINESS DECISION MAKING
To make a well informed decision, a company’s management gleans from various sources
among which are financial statements. Financial statements are the most complete, objective
and reliable information base in which one can form an opinion on the property and financial
position of a company (Thalassinos and Liapis, 2014). Financial statement is used by
management of a company as the basis for making managerial decisions. The information
from the financial statement is necessary for the analysis of organisation’s activities. Most
often, the goal of financial statements is to steer the minds of the senior officers in combining
their business intelligence so as to find the best ways to drive the company towards
profitability.
The information in the financial statements is considered to be the most influential in making
business decisions. It helps to increase knowledge and reduce uncertainty among users of this
information, helping them to make meaningful decisions within the objective framework.
The analysis of financial statements plays an important role in the preparation of decisions
that concern financial aspect of an entity especially on achieving an effective balance
between the elements of assets to work efficiently and the elements of liabilities to reach the
lowest cost of funds invested (Abu Huwaidi, 2011). The financial statements play a vital role
in the short and long term decisions of business organisations. The financial information
obtained from financial statement helps in making many decisions like investment, financing
and dividend decision and such decisions are considered as an important aspect for
maintaining the business quality and with the assistance of ratio analysis, some significant
results are drawn regarding the financial health, profitability and the efficiency of the firm
(Sahu and Charan, 2013).
2.3 THEORETICAL REVIEW OF THE STUDY
This research work will focus on theories such as stakeholder’s theory and decision
usefulness theory.
2.3.1 STAKEHOLDER’S THEORY
The stakeholder’s theory considers all those who had one input or the other towards
achieving organisation goals and objectives. These groups are all interested in the overall
performance of the business and in its financial reports to ensure proper accountability and
profitability. Many users especially the external use annual reports to make investment and
other business decisions. Investors, creditors, lenders have to assess the earnings prospect of
companies by examining the implications of different accounting procedures (Jawahar,
2017). All the users are interested to know the effect of alternative reporting method on their
decisions. For an instance, corporate executives want to know how straight line method of
depreciation affects their welfare. Similarly, if a company is concerned about the market
value of its shares, the accounting methods effects on share prices are to be analyzed.
2.3.2 DECISION USEFULNESS THEORY
The decision usefulness theory emphasizes the relevance of the information communicated to
decision making and on individual and group behaviour caused by the communication of
information (Osho and Adebambo, 2018). Accounting is assumed to be action oriented. The
focus is on the relevance of information being communicated to decision makers and the
behaviour of different individuals or groups as a result of the presentation of accounting
information. However, decision usefulness can also take into consideration the effect of
external reports on the decision of management and the feedback effect on the actions of
accountants and auditors.
The theory sets out a procedure for allowing additional information to be obtained from
reporting entities so to revise a decision maker’s subjective assessment of the probabilities of
what might have happened after a decision is made. According to El-Maude et al (2015), the
philosophy behind decision usefulness theory is to point financial reporting to a particular
class of users with the view to optimally utilize all the available information capable of
making informed decision. Decision usefulness theory takes the view that if we cannot
prepare theoretically correct financial statements, at least we can try to make financial
statements more useful (Dandago and Hassan, 2013). However it should be appreciated that
tailoring financial reports to the needs of each of the users could be easier than struggling to
satisfy the needs of all the users concurrently (El-Maude et al, 2015)
2.4 EMPIRICAL REVIEW
Peter (2013) focused on the evaluation of financial reports being instruments for effective
managerial planning and decision making. The objective of the study was to re-establish the
relevance of financial reporting in organizational management. In order to achieve this, the

researcher administered questionnaires to the staff of WEMA Bank branches in the western
states of Nigeria. The result of the study indicates that financial reporting as a device for the
disclosure of organisation’s financial dealings can eliminate some problems resulting from
appropriate planning and decisions.
Adebayo et al (2013) study examined the impact of accounting information system in
assisting organisations in making sound and effective decision. The major source of data to
their research was primary data through the administration of questionnaires. The regression
analysis and Pearson’s correlation was used for the data analysis. Their findings shown that
accounting information system is an indispensable tool in investment decision making of
business organisations. Business organisations are however advised to invest on information
technology tools as to improve their efficiency, effectiveness and their overall performance.
Nkuhi (2015) studied the role of financial data in investment decision making. The study
examined the role and impact of financial statements on investment decision. The study
followed the descriptive analytical and case study approaches in the pursuit of results by
analyzing these statements through the use of financial indicators calculation. The result
indicated that sound financial statements make investors more confident in their decision
making as well as knowledge of the sample of the study of financial variables. This study
encouraged the use of financial statements analysis in the investment decision.
Harendra (2016) studied relationship that existed between accounting and decision making
in the Sri Lankan Industrial Division. The sample for the study consisted of seventy public
quoted manufacturing companies operating in the country. The relationship between
accounting information and manufacturing related strategic decision making was analyzed
using Pearson’s correlation. The findings from the study indicated that accounting
information has a statistically significant strong positive correlation with manufacturing
related strategic decision making of companies operating in Sri Lanka’s manufacturing
sector.
Ionu and Petec (2015) studied the significance of accounting information in decision making.
The researchers identified four principal qualitative characteristic; reliability, compatibility of
information, comprehensibility and relevance. They also suggested that accounting
information has a crucial role in substantiating the economic decisions, offering the
possibility of an accurate representation of economic phenomena and processes. There is a
consistent operation and making of decision by the users and they make use of the
information provided by financial statements. This study indicates that accounting
information has a positive relationship with decision making.
2.5 REVIEW SUMMARY
This chapter looked into three aspects; conceptual, theoretical and empirical review. Under
the conceptual review, financial statements’ nature, attributes, element, importance, types
and users was considered. It also considered business decision making, value of accounting
information system and the usefulness of financial statement on business decision making.
This chapter also looked into theories like stakeholder’s theory and decision usefulness
theory. This chapter also considered empirical review from studies like the evaluation of
financial reports being instruments for effective managerial planning and decision making,
the impact of accounting information system in assisting organisations in making sound and
effective decision, the role of financial data in investment decision making, the relationship
that existed between accounting and decision making in the Sri Lankan Industrial Division
and the significance of accounting information in decision making. The empirical review
from these studies shows that financial statements is significantly used and relevant in
making decision making.

REFERENCE
Abu, H. N. (2011). The role of Accounting Information in Rationalizing Capital Expenditure

Decisions. An Empirical Study on Companies Listed in the Palestine Exchange. Master
Thesis, Faculty of Commerce, Islamic University, Palestine.
Adebayo, M., Idowu, K. A., Yusuf, B. & Bolarinwa, S. A. (2013). Accounting Information
System as an aid to Decision Making in Food and Beverages Companies in Nigeria.
Austrialian Journal of Business and Management Research, 3(9), 19-28, Available online at
http://www.academicjournal.org/JAT
Ahmed, S. (2010). Discover Fraud and Manipulation of Financial Statements. Saudi Arabia:
King Fahd National Library.
Atrill, P. & McLaney, E. (2015). Accounting and Finance for Non- Specialists (9th ed.).
Plymouth Pearson.
BDO (2010). International Financial Reporting Bulleting 2010/24 Conceptual Framework

for Financial Reporting IFR. Advisory Limited, Uk.
http://www.ifrs.org/investor-resources/2010-persepectives/january-2010-perspectives/
Pages/objective-of-financial-reporting.pdf
Dandago, K. I. & Hassan, N. I .B. (2013). Decision usefulness approach to financial

reporting: A Case for Malaysian Inland Revenue board. Asian Economic and Financial
review, 3(6), 772-784. http://aessweb.com/journal
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work ltd, Enugu.
Eisenfuhr, F. (2011). Decision making. New York, NY: pringer.
El-Maude, J. G., Bawa, A. B., Dandago, K. I. & Abu-Saeed, M. (2015). The general public
perception of decision usefulness approach to financial Reporting: A replection from
Accountancy Department, Mautech, Yola, Nigeria. Journal of Arts, science and Commerce,
6(3), 29-40.
Farsad, A. & Tirandaz, H. (2011). Qualitative characteristics of financial information and its
role in decision making of managers, monthly bank and the economy, 144.
FASB (2010). Conceptual Framework Statement of Financial Accounting Concepts 8:

Conceptual Framework for Financial Reporting, Norwalk, Connecticut.
Hadi, S. (2014). The impact of accounting information systems on financial performance: A

case study of TCS- India, India Journal of Fundamental and Applied Life Science, 4(4).
Hamdan, A. (2013). The effectiveness of the accounting information system in the financial
management control. University of Kasidi Merbah Ouargla, Algeria.
Harendra, K. (2016). Relationship between Accounting Information and Decision Making in

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Invention, 5, 524-554.
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accounting decisions. IFRS policy changes, Royal Holloway, University of London, Eghan,
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Ionu, S. & Petec, D. (2015). The Importance of Accounting Information in Decision making.
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CHAPTER THREE
METHODOLOGY
3.1 INTRODUCTION
This chapter dealt with the research method used in this study. It presents the research design
used, population of the study, sampling size and sampling techniques, sources of data, data
collection method, techniques of data analysis, description of variables, analytical tools and
hypothesis test procedures applied in this study.
3.2 RESEARCH DESIGN
A research design is a plan, structure and strategy of investigation that is adopted with the
aim of obtaining answers to research questions with optimal control of variables.. It is a plan
to answer a set of questions. It is an inquiry which provides specific direction for the
procedures in a research (Creswell, 2014). This is a step by step procedure which is adopted
by a researcher before the data collection and analysis process commences so as to achieve
the research objective in a valid way.
Survey research design is employed in this research. Survey design involves the critical
observation of events, objects, subjects and ideas without attempt to control the condition of
such phenomenal (Jongbo, 2014). It is the research design in which the researcher does not
aim to control or manipulate any of the variables under investigations. The essence of using
survey design is because survey studies provide information on large group of people, with
very little effort and in a cost effective manner. It deals with questions that seek to find out
about the nature of the target population and is best utilized when control of dependent and
independent variables is not easily achievable or desirable (Wabwoba and Ikoha, 2011).
3.3 POPULATION OF STUDY
Population can be defined as a comprehensive group of individuals, institutions or objects
with common characteristics. It is the researcher’s group of interest to which the researcher
would like the result of the study to be generalized. The population of this study consists of
180 accountants, auditors, senior staff and management of Emenite Nigeria Limited.
3.4 SAMPLING SIZE AND SAMPLING TECHNIQUES
To ensure effective coverage of the entire population, the researcher considered it pertinent
and expedient to take a sample out of the study population for the purpose of generation of
results.
The study adopted a formular by Taro Yamane (1967) because it is a finite population and it
provides a simplified formular. The sample size will be determined by applying a statistical
formular. The formular is stated below;
n = N/1+N(e)2
Where n = sample size
N= Finite Population
1 = Constant
e = Co-efficient or error limit
For this study, 5% or 0.05 error limit is voluntarily taken by the researcher. Then the sample
size of the study is determined as follows;

n = 180/ 1 + 180(0.05)2
n = 180/1+180(0.0025)
n = 180/1+0.44
n= 180/1.44
n = 124.1
Thus, the sample size for the study is 124. Based on this, 124 questionnaires were
administered to the accountants, auditors, senior staff and management of this company.
3.5 SOURCES OF DATA
This refers to various ways and methods in which data were collected for the purpose of the
study. This study used both primary and secondary sources of data.
3.5.1 PRIMARY SOURCES
Primary data can be collected either through experiment or survey. In the case of survey, data
can be collected through one or more of the following ways; personal interview,
questionnaire and observation. For this study, questionnaire was used. The questionnaire
used was structured question with multiple options for the respondents to choose from. The
questionnaire was used to obtain information about the impact of financial statements on
business decision making. The questions asked in the questionnaire were well structured so
as to retrieve information for the researcher.
3.5.2 SECONDARY SOURCES

The secondary data are the ones collected from already written works both published and
unpublished ones that have some relevance to the subject matter under study. The secondary
sources consist of textbooks, journals and downloaded works from the internet.
3.6 DATA COLLECTION METHOD
For the purpose of this study, questionnaire was used to collect data from respondents. A set
of questionnaires was prepared and administered to the accountants, auditors, senior staff and
management of Emenite Nigeria Limited. The researcher used questionnaires made up of
closed ended questionnaires. This was done to examine their views, knowledge and
perception about the impact of financial statements on business decision making in Nigeria.
3.7 TECHNIQUES OF DATA ANALYSIS
Techniques used for data analysis in this work are tables, histograms and percentage. Tables
were used in the presentation of the data obtained. Histograms were used in the graphical or
visual presentation of the data obtained. Percentages were used to show the frequency of the
responses to the question in the questionnaire. The researcher used Pearson’s Correlation to
test the hypotheses formulated in the study.
3.8 DESCRIPTION OF VARIABLES
A variable is anything that can accept different values. Variables used in this research are
independent and dependent variables.
3.8.1 INDEPENDENT VARIABLES
It is the variable that affects the dependent variable. This is the variable that the researcher
will manipulate to see if it makes the dependent variables change. In this research work, the
independent variable is the financial statements. Financial statements can be defined as
financial information with reference to the economic activities of a firm.
3.8.2 DEPENDENT VARIABLES
The dependent variables are the variables that are influenced by independent variables. In
this research work, the dependent variable is business decision making. Business decision
making can be defined as the process of selecting a right and effective course of action from
a set of alternatives for the purpose of achieving organizational or managerial objectives and
goals.
3.9 ANALYTICAL TOOLS
For the purpose of this study, the analytical tool used in testing the hypotheses is Pearson’s
Correlation. This analytical tool was chosen because it is suitable for the study which is to
determine the impact of financial statements on business decision making in Nigeria.
3.10 HYPOTHESIS TEST STATISTIC
To test hypothesis one, the Pearson’s Correlation was used to determine whether there is a
relationship between financial statements and business decision making.
Hypothesis two was tested by using Pearson’s Correlation to ascertain the impact of financial
statements on decision making of business organisations.
Hypothesis three was tested by using Pearson’s Correlation to ascertain whether there are
obstacles to the effective use of financial statements for business decision making.
REFERENCE
Creswell, J. (2014). Research Design: qualitative, quantitative and mixed methods

approaches. Thousand Oaks, California. Sage Publications, Inc.
Jongbo, O. C. (2014). The role of research design in a purpose driven enquiry. Review of
Public Administration and Management, 3(6), 87-94.
Wabwoba, F. & Ikoha, A. (2011). Information Technology research in developing

nations:Major research methods and publication outlets. International Journal of Information
and Communication Techbnology Research, 1(6), 253-257.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 INTRODUCTION
This chapter deals with the presentation, analysis and interpretation of data generated by the
researcher through the questionnaire administered to the senior staff, managers and stakeholders
of Emenite Nigeria Ltd. The results of the questionnaires were presented in the tables and figures
below and their responses were shown in percentages.
4.2 PRESENTATION AND ANALYSIS OF DATA

The data presented and analysed was carried out with the actual number of respondents who
returned their questionnaire. As shown in table 4.1 below.
Table 4.1 Questionnaire Distribution and Collection
Option Number Number Returned Number not Returned

Distributed
Questionnaire 124 120 4
Percentage 100 97 3
Source: Field survey, 2021
The table above shows that the researcher distributed 124 copies of questionnaire to the 124
sampled respondents, but those that responded and returned the copies of questionnaire were
120; as such the researcher based the analysis on the 120 copies of questionnaires duly filled and
returned.
Tables 4.2: Years of Working Experience
Cumulative
Years of working experience Frequency Percent Percent
5 years and below 39 32.5 32.5
6- 10 years 33 27.5 60.0
11-15 years 35 29.2 89.2
16 years and above 13 10.8 100.0
Total 120 100.0
Figure 4.1: Years of Working Experience
In table 4.2 and figure 4.1, the result shows that the years of experience of 39 or 32.5%
respondents are 5 years and below, 33 or 27.5% have 6 - 10 years of working experience, 35 or
29.2% respondent are 11-15 years of working experience while 13 or 10.8% respondents are 16
years and above.
Table 4.3: Educational Qualification

Levels Frequency Percent Cumulative
Percent
HND/BSc 77 64.2 64.2
MBA/MSc 34 28.3 92.5
Ph.D./Additional
9 7.5 100.0
Qualifications
Total 120 100.0
Figure 4.2 Educational Qualification
In table 4.3 and figure 4.2, the result shows that 77or 64.2% are holders of first degree or
HND/B.Sc, 34 or 28.3% have MBA/MSC, while only 9 or 7.5% respondent have Ph.D. and
Professional Diploma. It shows that first B.Sc/HND holders are majority numbering 77 or
64.2%.
Table 4.4 Position of Workers
Positions Frequency Percent Cumulative
Percent
Accountant 30 25.0 25.0
Manager 20 16.7 41.7
Director 15 12.5 54.2
Stakeholder 7 5.8 60.0
Auditor 15 12.5 72.5
Executive
6 5.0 77.5
Officer
Senior
27 22.5 100.0
Officer
Total 120 100.0
Figure 4:3 Position of Workers
In table 4.4 and Figure 4.3, the result shows that 30 or 25% are Accountants, 20 or 16.7% are
managers, 15 or 12.5% respondent are directors, 7 or 5.8% of the respondents are stakeholders,
15 respondents or 12.5% are auditors, executive officers are 6 or 5% while 27 or 22.5% of them
senior officers.
Table 4.5: Financial statements are prepared and utilized by business organisations
Responses Frequency Percent Cumulative
Percent
Agree 33 27.5 27.5
Strongly Agreed 55 45.8 73.3
Undecided 2 1.6 74.9
Disagree 8 6.7 81.6
Strongly Disagree 22 18.3 100.0
Total 120 100.0
Figure 4.4: Financial statements are prepared and utilized by business organisations
Table 4.5 and figure 4.4 shows that 33 or 27.5% of the respondents strongly agree that financial
statements are prepared and utilized by business organisations, 55 or 45.8% Agreed, 2
representing 1.6% were undecided, 8 or 6.7% disagreed while 22 or 18.3% respondents strongly
disagree. It shows that the number of respondent that strongly agreed and agreed has the highest
number that is 39 and 35 respectively indicating that financial statements are prepared and
utilized by business organisations.
Table 4.6: Financial statements have an impact on the decision making of business
organisations
Percent
Strongly Agree 39 32.5 32.4
Agreed 42 35.0 67.5
Disagree 12 10.0 85.8
Total 120 100.0
Figure 4.5: Financial statements have an impact on the decision making of business
organisations
The result in table 4.6 and figure 4.5 shows that 39 or 32.5% respondents strongly agree that
financial statements have an impact on the decision making of business organisations, 42 or
35% agreed, 10 or 8.3% respondents were undecided while 12 or 10% respondents disagreed and
17 or 14.2% respondents strongly disagreed. This indicated that those that agreed and strongly
agreed has the highest response rate showing that financial statements have an impact on the
decision making of business organisations.
Table 4.7: Financial statements have a relationship with decisions made by business
organisations
Percent
Agreed 28 23.3 50.0
Disagree 26 21.7 74.2
Total 120 100.0
Figure 4.6: Financial statements have a relationship with decisions made by business
organisations
Table 4.7 and figure 4.6 shows that 32 or 26.7% respondents strongly agreed that financial
statements have a relationship with decisions made by business organisations, 28 or 23.0%
respondents agreed, 3 or 2.5% respondents were undecided while 26 or 21.7% respondent
disagreed and 31 or 25.8% respondents strongly disagreed. Those that strongly agreed have the
highest responds rate implying that financial statements have a relationship with decisions made
by business organisations.
Table 4.8: The quality of financial statements determines a business organisational

performance
Percent
Strongly Agree 36 30 30
Agreed 38 31.7 61.7
Disagree 26 21.6 85
Strongly Disagree 18 15 100.0
Total 120 100.0
Figure 4.7: The quality of financial statements determines a business organisational

performance
Table 4.8 and figure 4.7 revealed that 36 or 30% respondents were of the view that they strongly
agrees that the quality of financial statements determines a business organisational performance,
38 or 31.7% respondents agreed, 2 or 1.7% was undecided 26 or 21.6% disagreed while 18 or
15% respondents strongly disagreed with the above assertion, this shows that agreed and strongly
agreed have the highest number of responds implying that the quality of financial statements
determines a business organisational performance.
Table 4.9: Financial statements of a business organisation fulfill the basic expectation of
helping in effective decision making.
Percent
Agreed 32 26.7 70
Disagree 15 12.5 84.2
Total 120 100.0
Figure 4.8: Financial statements of a business organisation fulfill the basic expectation of
helping in effective decision making.
Table 4.9 and figure 4.8 shows that 52 or 43.3% strongly agreed that financial statements of a
business organisation fulfill the basic expectation of helping in effective decision making., 32 or
26.7% respondents agreed, 2 or 1.7% were undecided, 15 or 12.5% respondents disagreed while
19 or 15.8% respondent strongly disagreed, the result shows that those that strongly agreed and
agreed has the highest responds rate of 52 and 32 respectively, implying that financial statements
of a business organisation fulfill the basic expectation of helping in effective decision making.
Table 4.10: Financial statements in business organisations provide basic information

needed by the external users
Percent
Agreed 35 29.2 64.2
Disagree 27 22.5 89.2
Total 120 100.0
Source: Field Survey, 2021
Figure 4.9: Financial statements in business organisations provide basic information

needed by the external users
Table 4.10 and figure 4.9 shows that 42 or 35% respondents strongly agreed that financial
statements in business organisations provide basic information needed by the external users, 35
or 29.2% respondents agreed, 3 or 2.5% were undecided, 27 or 22.5% disagreed while 13 or
10.8% strongly disagreed, the above result goes to show that financial statements in business
organisations provide basic information needed by the external users.
Table 4.11: Financial statements are used to identify the future of the business organisation
and management
Percent
Agreed 43 35.8 70.8
Disagree 10 8.4 80.0
Strongly Disagree 24 20 100.0
Total 120 100.0
Figure 4.10: Financial statements are used to identify the future of the business
organisation and management
Table 4.11 and figure 4.10 shows that 42 or 35% of the respondents strongly agreed that
financial statements are used to identify the future of the business organisation and management,
43 or 35.8% respondents agreed, 1 or 0.8% respondent were undecided, 10 or 8.4% disagreed
while 24 or 20% strongly disagreed, this shows that financial statements are used to identify the
future of the business organisation and management.
Table 4.12: Financial statements contribute to the poor decision making of business
organisations
Frequency Percent Cumulative
Percent
Agreed 45 37.5 78.3
Disagree 9 7.5 87.5
Total 120 100.0
Figure 4.11: Financial statements contribute to the poor decision making of business
organisations
Table 4.12 and Figure 4.12 shows that 49 or 40.8% respondents strongly agreed that financial
statements contribute to the poor decision making of business organisations, 45 or 37.5%
respondents agree while 2 or 1.7% were undecided, 9 or 7.5% respondents disagreed and 15 or
12.5% respondents strongly disagreed, those that strongly agreed has the highest number of 49
followed by those that agreed with the above assertion, this implies that financial statements
contribute to the poor decision making of business organisations.
Table 4.13: The reliability of financial statements is confirmed by multiple accounting
books
Percent
Agreed 9 7.5 41.7
Disagree 47 39.2 83.4
Total 120 100.0
Figure4.12The reliability of financial statements is confirmed by multiple accounting books
Table 4.13 and figure 4.12 shows that 41 or 34.2% strongly agreed that the reliability of financial
statements is confirmed by multiple accounting books, 9 or 7.5% agreed, 3 or 2.5% were
undecided while 47 or 39.2% respondents disagreed and 20 or 16.6% respondents strongly
disagreed, the result shows that the reliability of financial statements are not confirmed by
multiple accounting books.
Table 4.14: The risk of incorrect financial statement increases if accounting information
systems are used without proper control
Percent
Agreed 41 34.2 62.5
Disagree 16 13.3 77.5
Total 120 100.0
Figure 4.13: The risk of incorrect financial statement increases if accounting information
systems are used without proper control
Table 4.14 and figure 4.13 shows that 34 or 28.2% respondents were of the view that the risk of
incorrect financial statement increases if accounting information systems are used without proper
control, 41 or 34.2% respondents agreed, 2 or 1.7% respondents were undecided 16 or 13.3%
respondents disagreed while 27 or 23.5% strongly disagreed, this shows that the risk of incorrect
financial statement increases if accounting information systems are used without proper control.
Table 4.15: Failure to determine the responsibility of each employee according to his/her
powers to use the financial statements system can increase the chances of information
asymmetry
Percent
Agreed 41 34.2 62.5
Disagree 16 13.3 77.5
Total 120 100.0
Figure 4.14: Failure to determine the responsibility of each employee according to his/her
powers to use the financial statements system can increase the chances of information
asymmetry
Table 4.15 and figure 4.14 shows that 34 or 28.3% respondents opined that failure to determine
the responsibility of each employee according to his/her powers to use the financial statements
system can increase the chances of information asymmetry, 41 or 34.2% of the respondents
agreed, 2 or 1.7% were undecided, 16 or 13.3% respondents disagreed while 27 or 22.5%
respondents strongly disagreed. This shows that failure to determine the responsibility of each
employee according to his/her powers to use the financial statements system can increase the
chances of information asymmetry.
Table 4.16: There are obstacles to the effective use of financial statements in making
business decisions
Percent
Agreed 49 40.8 70.0
Disagree 20 16.7 89.2
Total 120 100.0
Figure 4.15: There are obstacles to the effective use of financial statements in making
business decisions
Table 4.16 and figure 4.15 shows that 35 or 29.2% respondents strongly agreed that there are
obstacles to the effective use of financial statements in making business decisions, 49 or 40.8%
of the respondents agreed, 3 or 2.5% were undecided, 20 or 16.7% respondents disagreed while
13 or 10.8% respondents were strongly disagreed. This shows that there are obstacles to the
effective use of financial statements in making business decisions.
4.3 ANALYSIS AND TESTING OF HYPOTHESES

In this section, the hypotheses raised were tested using Pearson correlations. This is owing to the
nature of the objective of the study and the data collected in this study.
Test of hypothesis 1
Ho: There is no significant relationship between financial statements and business decision
making.
H1: There is a significant relationship between financial statements and business decision
making.
Correlations
There is no There is a
significant significant
relationship relationship
between between
financial financial
statements and statements and
business business
decision decision
making making
There is no significant Pearson Correlation 1 .934(**)
relationship between Sig. (2-tailed) .000
financial statements and N
business decision 120 120
making
There is a significant Pearson Correlation .934(**) 1
relationship between Sig. (2-tailed) .000
financial statements and N
business decision 120 120
making
** Correlation is significant at the 0.01 level (2-tailed).
In hypothesis one, the researcher sought to ascertain whether there is a relationship between
financial statements and business decision making. In testing this hypothesis, Pearson correlation
tool was used. The result showed that relationship occurred at 0.934. This means that the
correlation is positive and very strong. Again, correlation is significant at 0.00 which is less than
0.05. This also means that the correlation was significant. The implication is that there is a
significant relationship between financial statements and business decision making. Therefore,
the alternate hypothesis is accepted.
Ho: Financial statements has no significant impact on the decision making of business
organisations.
H1: Financial statements has a significant impact on the decision making of business
organisations.
Correlations
Financial Financial
statements has statements has
no significant a significant
impact on the impact on the
decision decision
making of making of
business business
organisations organisations
Financial statements has Pearson Correlation
no significant impact on
1 .949(**)
the decision making of
business organisations
Sig. (2-tailed) .000
N 120 120
Financial statements has a Pearson Correlation
significant impact on the
.949(**) 1
decision making of
business organisations
Sig. (2-tailed) .000
N 120 120
In hypothesis two, the researcher sought to ascertain the impact of financial statements on the
decision making of business organisations. In testing this hypothesis, Pearson correlation tool
was used. The result showed that relationship occurred at 0.949. This means that the correlation
is positive and very strong. Again, correlation is significant at 0.00 which is less than 0.05. This
also means that the correlation was significant. The implication is that financial statements has a
significant impact on the decision making of business organisations. Therefore, the alternate
hypothesis is accepted.
Ho: There are no obstacles to the effective use of financial statements for business decision
making.
H1: There are obstacles to the effective use of financial statements for business decision making.
Correlations
There are no There are
obstacles to the obstacles to the
effective use of effective use of
financial financial
statements for statements for
business business
decision making decision making
There are no obstacles to the Pearson Correlation 1 .913(**)
effective use of financial Sig. (2-tailed) .000
statements for business N
120 120
decision making
There are obstacles to the Pearson Correlation .913(**) 1
effective use of financial Sig. (2-tailed) .000
statements for business
decision making N 120 120
Hypothesis three sought to ascertain whether there are obstacles to the effective use of financial
statements for business making. In testing this hypothesis, Pearson correlation tool was used. The
result showed that relationship occurred at 0.913. This means that the correlation is positive and
strong. More so, correlation is significant at 0.00 which is less than 0.05. This also means that the
correlation was significant. The implication is that there are obstacles to the effective use of
financial statements for business decision making, therefore, the alternate hypothesis is accepted.
4.4 DISCUSSION OF FINDINGS

In hypothesis one, the researcher sought to ascertain whether there is a relationship between
financial statements and business decision making. In testing this hypothesis, Pearson’s
correlation tool was used. The result showed that relationship occurred at 0.934. This means that
the correlation is positive and very strong. Again, correlation is significant at 0.00 which is less
than 0.05. This also means that the correlation was significant. The implication is that there is a
significant relationship between financial statements and business decision making. Therefore,
the alternate hypothesis is accepted. This research finding is in line with the research outcome of
Harendra (2016) and Ionu and Petec (2015).
In hypothesis two, the researcher sought to ascertain the impact of financial statements on the
decision making of business organisations. In testing this hypothesis, Pearson’s correlation tool
was used. The result showed that relationship occurred at 0.949. This means that the correlation
is positive and very strong. Again, correlation is significant at 0.00 which is less than 0.05. This
also means that the correlation was significant. The implication is that financial statements has a
significant impact on the decision making of business organisations. Therefore, the alternate
hypothesis is accepted. This research finding is in line with research outcome of Adebayo et al
(2013) and Nkuhi (2015).
Hypothesis three sought to ascertain whether there are obstacles to the effective use of financial
statements for business making. In testing this hypothesis, Pearson’s correlation tool was used.
The result showed that relationship occurred at 0.913. This means that the correlation is positive
and strong. More so, correlation is significant at 0.00 which is less than 0.05. This also means
that the correlation was significant. The implication is that there are obstacles to the effective use
of financial statements for business decision making, therefore, the alternate hypothesis is
accepted. The obstacles includes the possibility of bias, lack of details of items in the financial
statements, inability of financial statements to adjust for inflation and lack of qualitative
information in the financial statements.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1. SUMMARY OF FINDINGS
This study aimed to determine the impact of financial statements on business decision making in
Nigeria. The study revealed that there is a significant relationship between financial statements
and business decision making. It was also observed that financial statements has a significant
impact on the decision making of business organisations. The study further revealed that there
are obstacles to the effective use of financial statements for business decision making such as the
possibility of bias, lack of details of items in the financial statements, inability of financial
statements to adjust for inflation and lack of qualitative information in the financial statements.
5.2 CONCLUSION
Based on the findings, the researcher concluded that there is a significant relationship between
financial statements and business decision making. It was also concluded that financial
statements has a significant impact on the decision making of business organisations and that
there are obstacles to the effective use of financial statements for business decision making such
as the possibility of bias, lack of details of items in the financial statements, inability of financial
statements to adjust for inflation and lack of qualitative information in the financial statements.
5.3 RECOMMENDATIONS
Based on the study, the following recommendations were made:
1. There should be a cordial working relationship between the management of

organisations and the staff especially accountants. They are encouraged to be meeting
at intervals so as to assist the management in effective use of financial statements for
decision making.
2. Special panel should be set up to ensure the accuracy of the information from
financial statements so that users would not be deceived and also the financial
statements should be readily available for decision making.
3. Business organisations should invest on information technology tools so as to help
minimize the obstacles to the effective use of financial statements in making business
decisions and also to improve their efficiency, effectiveness and overall performance.
5.4 CONTRIBUTIONS TO KNOWLEDGE
This study which is the impact of financial statements on business decision making in Nigeria
has increase research materials in the field of accounting.
The study has served as a reference material for all those who may wish to carry out further
research on financial statement and business decision making.
5.5 RECOMMENDED AREAS FOR FURTHER STUDIES
Further research could be carried out on the following areas:
1. The relationship between financial statements and business decision making in Nigerian
manufacturing sector.
2. The impact of financial statements on the decision making of business organisations in
Nigerian banking sector.
3. The role of financial statements in investment decisions.
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Impact of Financial Statements On Business Decision Making in Nigeria

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CHAPTER ONE

1.1 BACKGROUND TO THE STUDY

tasks of management in any organisations. Decision making is defined as a choice competing

upon quality of decisions.

an organisation. Every business organisation prepares financial statements which consist of

statement of comprehensive income, statement of financial position, statement of cashflow,

contained in financial statement.

and up to date financial information provided and presented in a meaning way.

1.2 STATEMENT OF PROBLEM

informed decisions so as to minimize loss, make efficient investment decision, achieve

decisions. The financial statements consist of statement of comprehensive income, statement of

face business decision challenges in areas of achievement of meeting up in frequent change in

business decision making in Nigeria.

1.3 OBJECTIVES OF THE STUDY

decision making in Nigeria.

1. determine whether there is a relationship between financial statements and business

2. ascertain the impact of financial statements on the decision making of business

1.4 RESEARCH QUESTIONS

These research questions were developed for the study.

2. What is the impact of financial statements on the decision making of business

1.5 RESEARCH HYPOTHESES

These research hypotheses were formulated for this study.

1.6 SCOPE OF THE STUDY

1.7 LIMITATION OF THE STUDY

statements for business making.

It will be of great help to investors as to how to make a good investment decisions.

research that relates to this topic.

It will also contribute to the body of literature or knowledge.

1.9 DEFINITION OF TERMS

Financial Accounting: It can be defined as a means of collecting, summarizing, analyzing and

transactions and events which are usually of financial character.

person or other entity.

Aguolu, O. (2010). Financial Accounting- A practical Approach. Enugu: Institute for

Benedict, A. & Elliott, B. (2011). Financial Accounting- an Introduction (2nd ed.).

Grant, R. (2011). Rational Choice. Cambridge, MA: MIT Press.

Khawla, A. (2016). Contribution of Financial Budget Analysis to Financial Decision Making:

Sami, L. M. (2012). Financial Analysis of Financial Statements according to the financial

REVIEW OF RELATED LITERATURE

statements, attributes of a good financial statement, elements of financial statements, the

quality and importance of financial statements, users of financial statements, value of

on related issues of financial statements and business decision making.

2.2 CONCEPTUAL REVIEW

2.2.1 FINANCIAL STATEMENTS

Financial statement refers to a summary explaining or providing a picture of the financial

Malaney, 2015).Financial statement can be defined as a statement which conveys to

obligations and performances of the reporting enterprise.

standards(IAS). Financial statements indicate the profitability or loss of a business

organization by matching incomes and expenditure to arrive at a deficit, surplus or

2.2.1.1 STATEMENT OF FINANCIAL POSITION

was formally called balance sheet.

2.2.1.2 STATEMENT OF COMPREHENSIVE INCOME

2.2.1.3 STATEMENT OF CASHFLOW

and exit cash in company (Sadeghird 2015).

2.2.1.4 STATEMENT OF CHANGES IN EQUITY

2.2.1.5 NOTES TO THE FINANCIAL STATEMENT

information contained in financial statement. It must be provided in a systematic manner and

cross-referenced from the face of the financial statements to the notes.

2.2.1.6 VALUE ADDED STATEMENT

employees, providers of capital, the government and the management.

2.2.1.7 HISTORICAL FINANCIAL SUMMARY

2.2.2 BUSINESS DECISION MAKING

achieving the objectives of business organisations because unless minimum financial

of business organisation includes investment decision, financing decision and dividend