1.1 Background to the Study
First Bank of Nigeria Plc, for over a century has distinguished itself as a leading banking institution and a major contributor to Nigeria. It was founded in 1894 by a shipping Magnate from Liverpool, Sir, Alfred Jones. The bank commenced as a small operation in the office of Elder Dempster and Lanslot.
It was incorporated as a Limited Liability Company on March 31st 1894 with head office in Liverpool.
It started business with the corporate name of the Bank for British West Africa (BBWA) with a paid up capital of 12000 pounds sterling after absorbing its predecessor the African Banking Corporation which was established in the early 1792. This signaled the per-emanate position with the banking industry in West Africa. In the early years of operation, the bank recorded an impressive growth and worked closely with the colonial government in performing the traditional function of the central bank in the West African sub-region.
To justify its West African coverage, a bank was opened in Ghana, Gold Coast (now Ghana) in 1896 and another in Freetown Sierra Leone in 1896. These marked the genesis of the banks international banking operation. The First branch of the bank in Nigeria was in Calabar in 1900 and two years later the branches were extended to parts of Nigeria.
1.2 Statement of Problem
In fact, it is not surprising that in most cases of performance evaluation in the business organization, there is always an expression of dissatisfaction. In this research, some of the problems associated with it are:
i. Different accounting policies adopted by companies make comparison difficult.
ii. Financial ratios are expressed in figures and this may be misleading unless one remembers the principle upon which they are based.
iii. Ratio analysis is derived using historical data and there is a question as to whether or not the data provides relevant basis for making predictions.
1.3 Research Questions
· To what extent can the effect of different accounting practice be adopted in making comparison?
· To what extent can ratio analysis affect prediction making?
· How can all the problems be solved?
1.4 Objectives of the Study
The following are objectives of the study:
i. To determine the effect of adopting different accounting practice in making comparison.
ii. To know if the historical nature of ratio analysis affects making prediction.
iii. To give necessary advice on how these problems may be adjusted.
1.5 Statement of Hypotheses
Ho: Different accounting practices adopted by firms do not affect making comparison of ratios.
Hi: Different accounting practices adopted by firms affects making comparison of ratios.
Ho: Information generated using ratio analysis derived from historical data do not provide relevant basis for prediction.
Hi: Information generated using ratio analysis derived from historical data provides relevant basis for prediction.
Ho: Ratio expressed in figures cannot be misleading when you do not know the principles upon which they are based.
Hi: Ratio expressed in figures cannot be misleading when you know the principles upon which they are based.
Ho: Changes in the general price level do not affect ratios derived from financial statement.
Hi: Changes in the general price level affects ratios derived from financial statement.
1.6 Significance of the Study
One importance merit of the research is that it would help the management of First Bank of Nigeria Plc, Awka branch and interested firms to identify their strength and weakness and also work vigorously towards achieving its corporate objectives.
It could be a source of information and reference material to other researchers both in business enterprises and institution.
Finally, it will also assist investors, shareholders and other interested persons to appreciate the importance of financial statement analysis about investment, disinvestment and asset management.
1.7 Scope of the Study
There are several firms engaged in business activities, but for the purpose of the study, we will restrict our research to a particular bank, First Bank of Nigeria Plc, Awka Branch.
It is centred on financial statement analysis as a tool for effective decision making and it is limited to First Bank of Nigeria Plc management and staff and with a total sample size of 50 between 2009-2013.
1.8 Limitations of the Study
The research was operated with some limitations which ought to be stated for proper appreciation of study. These limitations include:
i. The availability of financial and resources is limited being that the researcher is a student and has no source of income/finance except her pocket money.
ii. The respondents showed a certain reluctance to answer some questions especially those pertaining to their company’s decision making.
iii. Given the time space in which the researcher had to do this work, it was not possible to touch every aspect of this subject matter.
1.9 Definition of Terms
The following are the terms used in this research work:
i. Accounting: This is the collecting, compilation, recording and analyzing of a business financial transaction, the preparation of financial reports and the presentation of such report to management to assist in decision making.
ii. Annual Reports: This shows the financial result of operational plans for future communications to its shareholders and other interested parties.
iii. Financial Statements: This is a document of record used by a firm to communicate its financial information to those who have interest in the company.
iv. Income Statement: This is also known as operating statement. It reflects the effort of management operating decision on business performance and the resulting profit and loss for the owners of the business over a specified period of time.
v. Assets: This described as the economic resources, i.e. things of value owned by a firm.
vi. Liabilities: These are debts payable in the future by the firm to the creditors.
vii. Ratio: This is the indicated quotient to two in mathematical expression.
viii. Ratio Analysis: This is the systematic use of data interpreting financial statement so that the strength and weakness of the firm, as well as the historical performance and current financial condition can be determined.
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