ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT AS A MANAGERIAL TOOL FOR DECISION MAKING

Financial  Statement  Analysis  and  Interpretation  is  a  very  vital instrument  of  good  management  decision-making  in  business enterprise.  Good decisions ensure business survival, profitability and growth.  Without financial statement analysis in investment decisions, an enterprise is likely to make decisions, which could spell its doom.  Poor or lack of qualitative financial statement analysis could lead to investment returns, low profitability and even inability to identify viable investment  opportunities.    The  main  objective  of  this  project  is therefore, was to determine how firms could use financial statement analysis and interpretation to aid management decisions and to avert the problems highlighted above.  Primary and secondary data are employed to  broaden the scope of  this study.   

Primary  data  are sourced from questionnaire responses.  This provided data for the validation of the hypotheses tested with the use of chi-square (X2 ).  The test revealed as follows: (1) Significant difference between the returns of the financial statement in Analysis and Interpretation based on  management  decision.  (2)  Organizational  profitability  has relationship with financial statement analysis and interpretation based management decision but not significantly.  The project concludes that companies should pay great attention to the use of financial statement  analysis  so  as  to  properly  equip  themselves  with  this invaluable  tool.   

The  researcher  recommends  the  following:  (a) Accountants or financial analysts should not be rushed in collection, preparation, analysis and interpretation off financial statements. (b) Financial  statements  should  be  made  to  reflect  current  cost accounting  to  eliminate  or  reduce  the  effects  to  historical  cost principle  and  inflation risk  element.  (c)  A  combination of  different ratios  should  be  used  in  analyzing  a  company’s  financial  and/or operating performance. Proper use of financial statement analysis should be made not only in investment but also in other areas of decision making. 

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT AS A MANAGERIAL TOOL FOR  DECISION MAKING