EFFECT OF FINANCIAL ACCOUNTING REPORTING ON MANAGERIAL DECISION MAKING
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CHAPTER ONE
INTRODUCTION
- Background to the Study
Financial reports provide an overview of a business profitability and financial condition in both short and long term. They are necessary sources of accounting information about companies for wide variety of users. In every business, there need information. This information needs ranges from financial, production, marketing etc. Generally, the larger the organization the greater the management need for information. Financial report plays a vital role in the decision making process of business organizations. The main purpose of financial reports is the provision of financial information as a record making. It has been said that accounting is the language of business (Needle 2008).
It might also be said that the ability to apply accounting knowledge is critical to success in business: A business prepares various reports at the end of each fiscal period. These reports summarize the changes that have taken place during the period. For these financial reports to be useful, the data need be presented in such a way that the users will recognize similarities; differences and trends from one period to another to enable them make decisions. The accounting information contained in the financial reports enables management to make more inform decisions. Financial reports should provide adequate information in all areas of organization and economic activities; it should be able to disclose clearly the nature and accurate accounts of the transactions from which a true and fair view financial position of the organization can be ascertained. Financial reports serve a lot of useful purposes to different users namely, shareholders, Creditors, Banks, government agents, employees, potential investors and the management of the entity itself (William 2008).
The above identified groups of persons rely on the information supplied by the given firm through financial reporting in which they have interest to ascertain the organization’s state of affairs which serves as important guide in deciding the extent to which they commit their fund.
1.2 Statement of the Problem
The problem that prompted this research is that management does not know the various ways of presenting financial accounting reporting, which often affects managerial decision making. There are no proper allocation of resources of the organization which leads to non-achievement of the profit maximization objective. Also the inability of the management to recruit trained and professional personnel, as a result, the quality of the decision made by this organization are very poor.
- Objective of the Study
The main objective of this study is to ascertain effect of financial accounting reporting on managerial decision making.
The specific objective are followed:
- To know whether the various ways of presenting financial accounting reporting has any effect on managerial decision making in the company.
- To examine the attitude of management in the allocation of resources which often lead to achievement of profit maximization objective.
- To determine the extent to which management recruit, trained and retrained the accounting staff on financial reporting.
- To determine whether management use financial accounting reporting solely for decision making.
1.4 Research Questions
Based on the objectives, the following research questions were developed:
- Does the various ways of presenting financial accounting reporting have any effect on managerial decision making of the company
- What is the attitude of management in the allocation of resources which often leads to profit maximization objective?
- To what extent does management recruit trained and retrained the accounting staff on financial reporting?
- Does management use financial accounting reporting solely for decision making?
1.5 Significance of the Study
The significance of this study is that, it shows the impact of financial reports in the operation of the organization. This research is beneficial to internal and external users of financial reports. This research will help managers determine the method of financial needs that will help in realization of their corporate objectives. The study will help the management to know the experts (accountants) that will be able to prepare an annual report that will enable the management to make well-informed decision that will enhance profit maximization. It will enable the external users to know whether the organization is making profit in order to invest more. This study will also serve as resource material for other researchers for further research in related areas.
1.6 Research Hypothesis
This hypothesis was propos by the study;
Ho: There is no relationship between financial accounting report and managerial decision making in Idems Ultimate Uyo, Akwa Ibom State.
Hi: There is relationship between financial accounting report and managerial decision making in Idems Ultimate Uyo, Akwa Ibom State.
1.7 Scope of Study
This research work covered the whole of Akwa Ibom State manufacturing companies, but due to certain constraints the research is restricted to Idems Ultimate Company PLC. Thus, the research investigates the impact of using financial reports in making management decisions.
1.8 Limitation of the Study
The limitation of this study is the time factor. Since the researcher carried out the research at the same time with her studies, there was limited time for to cover all the necessary areas of the research study. And also lack of audience from the respondents.
1.9 Definition of Terms
Annual Report: This is a comprehensive report on a company’s activities throughout the preceding year. Annual reports are intended to give shareholders and interested people information about the company activities and financial performance.
Managerial Decision: This is the decision concerning the operation of the firm, such as the choice of the firm size, firm growth rate, and employment.
Information: This can be seen as data which have been processed into a form meaningful to the recipient (receiver).
Organization: Is an organized body of people working together for the pursuit of a particular purpose (s) called organization goals.
1.10 Organization of Study
This project is made up of five chapters and each chapter is sub-divided into units to ease the work.
Chapter one provides a general introduction to the study. It covers areas such as; the background of the study, statement of the problem, objectives of the study, research questions, significance, scope, limitation, organization of the study and definition of terms.
Chapter two is titled “review of related literature”. This chapter evaluates and reviews existing relevant work related to this study by different authors, research work conducted and articles in respect of financial accounting report and managerial decision making.
Chapter three presents the research design and methodology which includes; the area and population of study, sample size and sampling techniques, instruments/methods for data collection, and method of data analysis.
Chapter four deals on the systematic analysis, presentation and interpretation of the data collected.
Chapter five presents the summary and conclusion of findings, and recommendations.
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