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THE EFFECT OF FINANCIAL ACCOUNTING REPORTING ON MANAGERIAL DECISION-MAKING

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Financial reports provides 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, needs 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 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. It might also be said that the ability to apply accounting knowledge is critical to success in business: A business prepares various report at the end of each fiscal period. This report summarizes the changes that have taken place during the period. For this financial report to be useful, the data be presented in such a way that the user will recognize, Similarities, differences and trends form 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 report 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 fun which the true and fair view financial position of the organization can be ascertained. Financial reports serve a lot of useful purpose to different users namely, shareholders, Creditors, Banks, government agents, employees, potential investors and the management of the entity it self. 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 an important guide in deciding the extent to which they commit their fund. It is the “communication of financial information useful for decision making such as investment, credit and other business decisions” such communication include, general. Purpose financial statement, balance sheet, equity report, cash flow reports and notes to these statements.

1.2 STATEMENT OF THE PROBLEM

The problem of this research is that, the 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.

1.3 OBJECTIVE OF THE STUDY

The research work covers the effect of financial accounting reporting on managerial decision making. The studies have the following objectives:

1. To know whether the various ways of presenting financial accounting reporting have any effect on managerial decision making in the company.

2. To examine the attitude of management in the allocation of resources which often leads to achievement of profit maximization objective.

3. To determine the level of which management recruit trained and professional personnel which leads to quality decision making.

1.4 RESEARCH QUESTIONS

Based on the objectives, the following research questions were developed:

1. Does the various ways of presenting financial accounting reporting have any effect on managerial decision making of the company?

2. What are the attitude of management in the allocation of resources which often leads to profit maximization objective?

3. To what extent does management recruit trained and professional personnel which leads to quality decision making?

1.5 STATEMENT OF HYPOTHESIS

Because of the above research questions, the following hypotheses were formulated.

HYPOTHESES 1

HO: The various ways of presenting financial accounting reporting does not have effect on managerial decision making of the company.

HI: The various ways of presenting financial accounting reporting have effect on managerial making of the company.

HYPOTHESIS 2

HO: There are no proper allocation of management resources which often leads to profit maximization objective.

HI: There are proper allocation of management resources which often leads to profit to profit maximization objective.

HYPOTHESIS 3

HO: Management does not recruit trained and professional personnel which leads to quality decision making.

HI: Management recruit trained and professional personnel which leads to quality decision making.

1.6 SIGNIFICANCE OF THE STUDY

The significance of this study is that, it shows the effect of financial reports in the operation of the organization. This research is beneficial to internal and external users of financial report. The financial of 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 coder to invest more. Thi0s study will also serve us resource material for other researchers for further research in related areas.

1.7 SCOPE AND LIMITATION OF THE STUDY

The research work covered the whole of Enugu State manufacturing companies, but due to certain constraints the research is restricted to Nigeria Bottling Company PLC. Thus, the research investigate the effect of using financial reports in making management decisions. The limitation of this study is the time factor. Since the researcher carried out the research of 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 despondence.

1.8 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‟s activities and financial performance.

MANAGERIAL DECISION: This is the decision concerning the operating 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.

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