EFFECTS OF PERFORMANCE EVALUATION THROUGH THE ANALYSIS OF FINANCIAL STATEMENTS ON INVESTMENT DECISIONS (A CASE STUDY OF LOGMAN NIGERIA PLC.)
ABSTRACT
The implications of performance evaluation via financial statement analysis on investment choice were investigated using Longman Nigeria Plc as a case study.
A structured questionnaire with eighteen (18) closed-ended questions and one (1) open-ended question was developed and administered to one hundred (100) respondents of the aforementioned company, but only ninety-four (94) questionnaires were completely filled and returned, based on the study’s set objectives.
As a result, the research used both primary and secondary data (i.e. questionnaire method, interview method, and data sourced from established publications). The acquired data was analyzed using the chi-square statistical approach.
The study’s findings suggest that performance evaluation should be in accordance with accomplishing corporate objectives, and that financial analysis has assisted in identifying the company’s operational weaknesses. According to the study, management should ensure that performance evaluations are aligned with corporate goals.
TABLE OF CONTENTS
INTRODUCTION TO CHAPTER ONE
1.1 Introduction to the Research
1.2 The Company’s Background
1.3 Formulation of the Problem
1.4 The Research Project’s Goals
1.5 Questions for Research
1.6 Hypothesis of Research
1.7 Importance of the research
1.8 The Study’s Scope and Limitations
1.9 Research Methodology
1.10 Research Methodological Limitations
1.11 Terms and Definitions
References
REVIEW OF LITERATURE IN CHAPTER TWO
2.1 Getting Started
2.2 Efficiency and Effectiveness
2.3 Evaluation of Performance Objectives
2.4 Evaluation between firms
2.5 Inter-temporal Assessment
2.6 Average Industrial Evaluation
Other Aspects of Performance Evaluation (2.7)
The Financial Statements (2.8)
Financial Statement Analysis (2.9)
Ratio Analysis 2.10
2.11 Alternative Methods of Financial Statement Analysis
2.12 Summary
References
RESEARCH METHODOLOGY (CHAPTER THREE)
Introduction (3.1)
3.2 Research Methodology
3.3 The Research Area
3.4 The Study Participants
3.5 Sampling and Sample Techniques
3.6 Instrument for Research
3.7 Validity and Reliability Pilot Study
3.8 Data Analysis Techniques
3.9 Why is the Chi-square approach used?
DATA ANALYSIS AND INTERPRETATION (CHAPTER 4)
Background Information (4.1)
4.2 Question for Research
4.3 Hypothesis Validation
SUMMARY, CONCLUSION, AND RECOMMENDATIONS IN CHAPTER FIVE
5.1 Summary
5.2 Final Thoughts
Recommendations (5.3)
5.4 Suggestions for Future Research
References
CHAPTER ONE
INTRODUCTION
1.1 INTRODUCTION TO THE STUDY
Financial analysis entails evaluating a company’s history, present, and expected future financial position. The goal is to find any weaknesses in the firm’s financial health that could lead to future troubles, as well as any strengths that the fine could exploit.
Financial accounting statements are becoming increasingly important. This is owing to the economy’s increased complexity and the tremendous expansion of corporate organizations.
1.2 HISTORY OF THE BUSINESS
Longman Nigeria was founded as a subsidiary of Longman Group Ltd on August 10, 1961. In 1724, a notable British publishing house was created. Although Longman, Green and Company, as the company was then known, had a presence in Nigeria since 1947, it had primarily served as a trading outpost for the parent company in the United Kingdom, focusing on the importation and distribution of education books primarily for the British school system.
A review of Longman Nigeria Plc’s history over the last 33 years reveals a number of successful projects that have had a significant impact on the direction and development of the publishing business, as well as education in Nigeria. The blueprint for Longman’s text development and list-building tactics may be traced back to its early employees.
1.3 DEFINITION OF THE PROBLEM
The extent to which a company’s overall performance can be influenced.
i. Ability to pay its financial obligations to investors in the form of dividends.
ii. Inability to satisfy debt payment deadlines due to a lack of cash.
THE STUDY’S OBJECTIVES (1.4)
The goal of this research is to:
i. Evaluate the performance of companies (with a focus on Longman Nig. Plc.) in order to determine their level of performance.
ii. Determine how much the study of the company’s performance influences investors’ decisions.
iii. Finally, interpret and advise on relevant steps to take in order to improve the company’s performance as needed.
1.5 QUESTIONS FOR RESEARCH:
Financial ratios allow a meaningful comparison of a firm’s financial data over time and with other firms, as well as the previous year’s performance and industry average performance. It serves as a foundation for answering certain important questions about the firm’s health.
i. What is the firm’s liquidity level?
ii. Does management generate enough profit from the company’s assets?
iii. How does the company’s management fund its investment?
iv. Are common stakeholders receiving adequate returns on their investments?
1.6 HYPOTHESES FOR RESEARCH
Top executives must understand that the efficacy with which accounting information meets the organization’s larger goals is determined by its relevance, timeliness, and correctness, as well as how it is used by employees.
Ho: Performance evaluation should be aligned with the achievement of business goals.
Hi: Performance evaluation should not be based on meeting business goals.
1.7 THE IMPORTANCE OF THE STUDY
Management of emerging businesses will benefit from this study. Its goal is to assist businesses in their efforts to boost growth and increase public investment. This research will be particularly useful in the following areas:
The research will help the company plan for its future growth and development.
It will also direct the company’s investment to more strategic sectors.
1.8 STUDY OBJECTIVES AND LIMITATIONS
The scope of this study will be based on manual analysis of Longman Nigeria Plc financial .’s statements as reported in its annual reports, which will be used to assess the company’s performance. The research will be conducted over a four-year period. The annual reports’ balance sheet and income statement will be assessed using ratios to highlight the company’s operating performance.
The study will be restricted to the publishing industry, which Longman is a part of. This study would also be limited to Longman Nigeria Plc’s performance in comparison to that of its competitors; no inter-firm comparisons would be made, instead focusing on the company’s overall performance. Personnel functions, administrative functions, and other non-financial functions will not be addressed.
METHODOLOGY, NUMBER 1.9
DATA COLLECTION METHOD
The researcher gathered primary and secondary data from the company’s (Longman Nigeria Plc.) annual reports as well as those of its competitors in the publishing sector.
1.10 THE RESEARCH METHOD’S LIMITATIONS
The primary source of information for this study was the annual reports of the companies under consideration, which were analyzed using ratio analysis. As a result, the study’s primary data is also used to elicit information.
With regard to the Annual Reports, the information contained therein was derived using the historical cost concept; nonetheless, they are not ideal predictors of the future and may not accurately reflect the current value of the naira.
1.11 TERMS AND THEIR DEFINITION
The review of the company’s operating performance is referred to as performance evaluation. As a result, it refers to a review of the operation’s profitability and efficiency.
Financial statements: The balance sheet and income statement in a company’s annual report are referred to as financial statements. Those statements are the accounting process’s final product.
Ratio analysis is the evaluation of two items’ relationships for the purpose of interpreting financial statements.
Profitability is profit as a percentage of the investment that produced it.
The business: Longman Nigeria Plc is the company in question.
REFERENCES
Financial: Theory and Practice with Nineteen Accounting Standards, M. A. Abata.
Managerial Accounting An Introduction, 3rd Edition, Areblen, A. R., and Bierman, H. (1982).
Financial Accounting: Principles and Practice, J. Folabi (1982). Publisher: Graham Burn
Management Accounting, 4th Edition, English Language Book Society, 1986. Batty, J.
L. M. Pandey, Financial Management, Vikas Publishing House, 1967.
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EFFECTS OF PERFORMANCE EVALUATION THROUGH THE ANALYSIS OF FINANCIAL STATEMENT ON INVESTMENT DECISIONS (A CASE STUDY OF LOGMAN NIGERIA PLC.)
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