THE USE OF ACCOUNTING INFORMATION IN ANALYSING THE FINANCIAL POSITION OF A FIRM (A CASE STUDY OF CAP NIGERIA PLC)

THE USE OF ACCOUNTING INFORMATION IN ANALYSING THE FINANCIAL POSITION OF A FIRM

(A CASE STUDY OF CAP NIGERIA PLC)

ABSTRACT

The purpose of this work is to use accounting information in analyzing the financial position of a firm. The work was written after a careful research and review of accounting information, the users and the uses and its application in analyzing the financial position of a firm taking chemical and allied product (CAP PLC) as a case study.

The researcher was inspired by the preponderance of business failure in the preponderance of business failure in the economy, most of these have been due to wrong analysis, interpretation and application of financial statements that is the balance sheet and the profit and loss account, for the purpose of through coverage of the topic under discussion. This study comprises of five chapters. The first chapter dealt with an introduction of the crucial issues, chapter two covered a review of related literature on the subject, and chapter three is on research methodology used in the study both primary and secondary data collection. The case study focused on the chemical and allied product plc. Also the historical background of the company was highlighted. The descriptive method of research was largely employed in this study and the financial reports of the chemical and allied product from 1993-1997 were the main source of data complementary sources of data from textbooks, journals, interviews and direct observation were also employed.

Chapter four focused on data presentation and analysis of findings. Data were collected, computed, analyzed, and presented using tables, charts and time series analysis. The research findings revealed that chemical and Allied product consider all financial ratios computer.

Chapter five dealt with summary of dings, recommendations and conclusion on completion of this study among other things that chemical and allied product plc should conjure to make use of toward ratios in analyzing the financial position of their firm since it use obviously had to improve overall performance in the company.

CHAPTER ONE

• INTRODUCTION 1


• STATEMENT OF THE PROBLEM 2


• OBJECTIVES OF THE STUDY 2


• RESEARCH QUESTIONS 3


• SIGNIFICANCE OF THE STUDY 4


• SCOPE OF THE STUDY 5


• LIMITATION OF THE STUDY 5

CHAPTER TWO- LITERATURE REVIEW

• INTRODUCTION 6


• ACCOUNTING INFORMATION 6


• THE USERS OF ACCOUNTING INFORMATION 6


• THE USES OF ACCOUNTING INFORMATION 7


• THE NIGERIAN ACCOUNTING STANDARDS

BOARD                                                                         10

• THE INTERNATIONAL ACCOUNTING

STANDARDS COMMITTEE                                       12

• ACCOUNTING POLICIES, CONCEPTS,

METHODS AND BASES                                             13

• ACCOUNTING POLICIES OF CAP. PLC. 17


• ACCOUNTING CONCEPTS 19


• ACCOUNTING METHODS 21

• FINANCIAL STATEMENT 23


• ACCOUNTING POLICIES OF CAP. PLC. 27


• CONCEP OF FINANCIAL RATIOS 28

CHAPTER THREE- RESEARCH DESIGN AND METHODOLOGY

• INTRODUCTION 33


• SOURCES OF DATA 33


• PRIMARY SOURCES 33


• SECONDARY SOURCES 34


• METHOD OF DATA ANALYSIS 34

CHAPTER FOUR- ANALYSIS AND INTERPRETATION OF DATA

• INTRODUCTION 35


• HISTORICAL BACKGROUND OF THE CAP PLC. 36


• METHOD OF STUDY 38


• TYPES OF FINANCIAL RATIOS 38


• THE 1993 CALCULATIONS OF ANNUAL REPORT OF CAP PLC.                    40


• THE 1994 CALCULATIONS OF ANNUAL

REPORT OF CAP PLC.                                                47

• THE 1995 CALCULATIONS OF ANNUAL

REPORT OF CAP PLC.                                                50

• THE 1996 CALCULATIONS OF ANNUAL

REPORT OF CAP PLC.                                                54

• THE 1997 CALCULATIONS OF ANNUAL

REPORT OF CAP PLC.                                                57

• COMMENTS ON RACH OF THE FINANCIAL

RATIOS (SUMMARY)                                                 60

CHAPTER FIVE- CONCLUSION AND RECOMMENDATION

• SUMMARY OF FINDINGS 68


• RECOMMENDATIONS 69


• CONCLUSION 71


• BIBLIOGRAHPY 73

CHAPTER ONE

1.1     INTRODUCTION

          Financial statement can be defined as a means of communicating to interesting parties, information on the resources obligation and performances of the reporting entity. The financial statement consists of balance sheet, profit and loss statement or income statement, notes on the accounts source and application of funds or cash flow statements, value added statement and 5 years historical financial summary.

Every business entity should provide information about its activities because the stakeholders, such as shareholders, bondholders, bankers, lenders suppliers, employees, management, trade contacts, government, financial analyst and advisors, all need to monitor how well their interest are being served. They rely on the periodic financial statement of business enterprises to provide the basic information on the profitability of the business. The financial position of a firm is very important to know if they are making expected turnover. It is also important in achieving attractive returns and sustainable growth on shareholders investments.

 

• STATEMENT OF THE PROBLEMS

The problems that will be encountered in using the accounting in analyzing the financial position of a firm include the following.

1. That the users of accounting information are not adequately informed.


2. People that use the accounting information do not understand the information given.


3. That guidelines and rules are not followed.

 

• OBJECTIVES OF THE STUDY

The objective of the study simply means the reason why the study or research is being carried out. It can also mean the aims or the purpose of the study. However the objectives of this study include the following:

1. The investigate the extent of use of accounting information to


2. To find out if the proper accounting policies and concepts are followed


3. To show the important of the analysis to users of accounting.


4. Mainly, it is to analyze the financial position of CAP PLC. Using the accounting information supplied in the annual reports.

 

• RESEARCH QUESTIONS

Following the problem identify in the statement of problem as stated above, the following fundamental question have become imperative for this study.

1. Who exactly are the users of the accounting information?


2. What exactly are the users of accounting information to the various users?


3. What are the disclosure requirements for financial statement?


4. What are the purposes of the disclosure requirements?


5. What are the accounting policies and concepts?


6. Has the company (CAP PLC.) adopted an accounting policy?


7. Whenever a change of accounting policy is made, is it usually disclosed or reported as appropriate?


8. Does the company (CAP PLC.) make appropriate disclosure requirements?


9. Are the proper interpretations given to the results being reported in financial statements?

 

• SIGNIFICANCE OF THE STUDY

The significance also means what the study is expected to show at the end of the research work or expected to be gained from once work. The significance of this study is therefore is:

It is also to show that the relevance of accounting information should be thoroughly explained and understood and also to show importance of comparing to analyze their growth and financial position through the use of accounting information.

• SCOPE OF THE STUDY

This study does not dwell on the truth or otherwise of the advantages and disadvantages or accounting information to analyze the financial position of a firm but is structures in such a way to explain the actual uses of accounting information by both the private and public sectors for analyzing the financial position of a firm. Using case study of CAP PLC., hence there is no hypothesis or any proof of such.

 

• LIMITATIONS OF THE STUDY

Research works in Nigeria, especially those adopting interview approaches, are best with a lot of limitations, which include, mass illiteracy, dearth of reliable secondary data, prejudice against the researcher himself, and secrecy. Many of these limitations where experienced in the course of this study. The research is carried out mainly at Lagos, Enugu and Anambra. It will also be limited to Annual Reports of CAP Plc.

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