Financial Statements Analysis As A Measure Of Performance And Efficiency In Banking Sector In Nigeria (A Case Study Of First Bank Of Nigeria Plc)

Project and Seminar Topics with material for Banking and Finance

Financial Statements Analysis As A Measure Of Performance And Efficiency In Banking Sector In Nigeria (A Case Study Of First Bank Of Nigeria Plc)


Proposal


Introduction

The strength of any organization could be properly assessed only from its financial position as it shall be reflect in the account data. The important of corporate financial reporting view of developing in the money market and capital market cannot be emphasized.

Financial statement analysis is the process of identify the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and the profit and loss account.


Statement of Research Problem

The statement of research problem shall be as follows:

  1. Ratio of the case study does not have meaning except is being compared with same standard.
  2. The interpretation of ratio rendered invalid as a of change in the value of money.
  3. The difference in definition of items in the balance sheet and income statement make the interpretation of ratio different.

Objective of the Study

The objective of financial statement shall be to gain and understanding of the firm’s current financial condition as well as its nature prospects which is turn can serve as the basic for decision making in the same light.

The objective of the research work shall also be.

  1. To determine the efficiency of the management of first bank plc.
  2. To accomplish this objective, financial ratio measure efficiency of an enterprise such as profit margin, net profit margin, return on total asset and net asset and other necessary ratio woe identified for calculation for period of one year.

Research Question

The research question of this research work shall be as follows:

  1. Does ratio analysis have any effect on the performance of banks?
  2. What are the significant roles of financial statement and balance sheet of the case study?

Formulation of Research Hypothesis

  • Ho: Does financial statement analysis have impact on performance efficient in the banking
  • Hi: Financial Statement has an impact on performance efficiency in the banking industry.

Significance of the Study

The research work significance shall be show the clear understanding of financial statement analysis bee, recent studies have emphasize the need to wide the area of responsibility of financial statement to take into cognizance the numerous users group.


Research Methodology

The research methodology shall be to design the necessary instrument by the researcher in order to later the relevant information require for accomplishii1c the research work. A tool for performance evaluation used secondary data for the analysis of financial statement.


Definition of Unfamiliar Terms

The unfamiliar term in this research work show as follow:

i. Efficiency:

The quality of doing well with no waste of time or money.

ii. Cognizance:

This is knowledge or understanding of the importance of the case.

iii. Sector:

This is a part of area of activities especially of country economy.


Organizationn of the Study

This research work shall be divided into a five chapters for ease of presentation of the facts and figure gather.

  • Chapter one shall consist of introduction, statement of problem, research question, research question, objective of the study, research hypothesis (HO, Hi) significance of the study, scope of the study definition of the key term and organisation the study .
  • Chapter two shall be literature reviews, historical background of the first an of Nigeria plc, nature of the financial statement analysis, the principle tool of analysis, nature and purpose of financial ratio and users of financial statement analysis e.t.c
  • Chapter three shall be present research design, data collection method, validity of ratio analysis, reliability of a data and method of data analysis.
  • Chapter four shall present talk about introduction, data presentation and analysis, data interpretation.
  • Finally, chapter five shall be explaining findings. Summary, conclusion and recommendation.

Abstract


The objective of this research work is to gain and understand the firm’s current financial condition as well as its nature prospects which in tern can serve as the basis for decision making in the same height of the above objective of financial statement analysis. The research work has attempted to highlight the importance of financial statements analysis, using financial statement to assess management efficiency and performance as a whole, not forgetting its important to outsider e.g. shareholder etc. The method of data collection for primary sources of data are: questionnaire, interview, observation and suggestion gathered form First Bank of Nigeria Plc.


Chapter One


1.1 Introduction

The organization strength of any enterprises could be properly access only from its financial position as it shall be reflect in the account data. The important of corporate financial reporting view of developing in the money market and capita market cannot be over emphases. Financial, statement analysis is the process of identifying the financial strength and weakness of the balance sheet and profit and loss account.

However, accounting information gives the summary of the economic performance and the situation of a business enterprise as well as it profitability. They also review how the provision of their resources has been effectively utilized. the use of the information provided is virtually of modern society. Decision take on the basis of such information affect the millions of people all over the world with ever increasing number of user whose interest are becoming more and more diverse, the need for proper understanding of such financial statement cannot be over emphasis. In order to arrive at a right conclusion, it is imperative that the account regaled a time fear review.

Corporate reporting service as an effective means of communicating financial statement and other data by companies of shareholder, prospective investor, government authority and general public.

Annual report and accounts are the cost significant single communication of economic and financial information to the shareholders and other interested group.

Annual report and accounts are therefore central to corporate reporting in order for the users of this annual reports and account to make use of its, there is need to further analysis the information contained in the financial statement .The income statement and balance sheet can be of great benefit to some of the users when properly analyzed.

One of the most important functions of financial accounting is to report information to external parties. The set of people who do not take part in the day to day management of the business

Such as the creditor, shareholders, investors, bankers are individual and organization that finance the firms operation.

Finally, each of these parties has an interest in analyzing and interpreting one or more broad area of business, especially its financial soundness and stabilized the efficiency of its management as well as future prospect for investors.


1.2 Statement of Problem

The statement of problem are comprise of the following

  1. Ratio of the case study does not have meaning except is compared with same standard
  2. The interpretation of ratio rendered invalid as a result of change in the value of money.
  3. The difference in definition of items in the balance sheet and income statement make the interpretation of ratio different.
  4. The ratio calculated at a point in time are less informative and effective as they suffer short term changes.
  5. The wide range of the bank operation have make it difficult to develop a meaningful set of industry average for comparism.

1.3 Research Question

  1. Does ratio analysis have any effect on the performance of banks?
  2. What are the significant roles of financial statement and balance sheet of the case study?
  3. How does the bank control the risk of illiquidity?

1.4 Objective of the Study.

Financial statement analysis provides a method for assessing the financial strength and weakness of all enterprises using information found in its financial statement.

The annual report and account, the objective of this analysis is to gain and understanding of the firm’s current financial condition as well as its nature prospects which in turn can serve as the basis for decision making in the same light of the above objective of financial statement analysis the objective of the research work in the second folds are:

  1. To determine the efficiency of the management Of first bank plc.
  2. To accomplish this objective financial ratio that measure efficiency of an enterprises such as gross profit margin net profit margin retune on total asset and net asset and other necessary ratio would be identified calculate for period of one year.
  3. To analysis the role of first bank of Nigeria of the proffered sector of the economy such as industry and agriculture.
  4. To appraise first bank contribution to the economic development
  5. To analysis some of the problems confronting the first bank of Nigeria in the cases of carrying out their services.
  6. To make recommendation based on the finding of the study.

1.5 Research Hypothesis {HO, HI}

  • H0: does financial statement analysis have a negative impact on performance efficiently in the banking industry?
  • Hi: financial statement analysis has an impact on performance efficiency in the banking industry.

1.6 Significance of the Study

The significance of the study is to show the clear understanding of financial statement analysis because recent studies have emphasized the need to widen the area of responsibility of financial

Statement to rake into cognizance the numerous users group and their divers’ interest.


1.7 Scope of the Study

  1. Time constraint: there has been as restriction concerning time allowed for the research work
  2. Lack of enough food: there has been a weak financial capability faced by the researcher while conducting the research.
  3. Insufficient data: the researcher could nor afford to obtained some essential material ii the course of the research work
  4. Uncooperated attitude and in accurate information given by the responder is another challenges faced by the researcher

1.8 Definition of Key Term

Efficiency:

The quality of doing well with no waste of time or money.

Sector:

This is a part of area of activity especially of a country’s economy.

Emphasized:

To give extra a force to a word or phrases when you are speaking especially to show that it is important.

Investor:

This can refer to as a person or an organization that invest money in business.

Performance:

This is the act of performing a play concert of some other form of entertainment or the act or process of performing a taste and action.

Stability:

It means quality or state of being steady and not changing or being disturbed in anyway.

Conflict:

This is a situation in which people groups are countries are involved in a serious disagreement or argument.

Information:

This can be defined as a fact or detail written on document that is sent from one person to another form that special language.

Analysis:

This can be defined as a detail study in order to understand more about it.

Cognizance:

This is knowledge or understanding of the importance of the case.


1.9 Plan of the Study

The research work has been divided into five chapters for case of presentation of the facts and figure gathered.

Chapter one contains the introduction statement of problem; research question; objective of the study; research hypothesis (H0, Ho).significance of the study; scope of the study:
Definition of the key term and plan or the study.

Chapter two treat literature review which include various definition and historical background of the First Bank of Nigeria PLC, nature of the financial statement analysis the principle tool of financial ratio, nature and purpose of financial ratios, users of financial statement analysis. Classification of financial ratios and profit before taxation.

Chapter three present research methodology. Research design, data collection method, and validity of ratio analysis, reliability of a data and method of data analysis.

Chapter four discuss introduction, data analysis and presentation, data interpretation and test hypothesis finally, five throw light on findings, summary, conclusion and recommendation.


Chapter Five


Findings, Summary, Conclusion and Recommendations

5.1 Findings

Attempt has been made through this research work on finaicia1 statement analysis as a measure of performance and efficiency in banking sector.

It was observed that financial statement analysis is highly useful tool. it represent crucial information to various users that interest in diverse field. The annual report and account of this analysis is to gain and understand the firms current financial condition and

  1. To determine the efficiency of the management of banks in banking sector
  2. To accomplish this objective financial ratio that measures the efficiency of enterprises
  3. To analyze some of the problem confronting bank in the cause of carryout their service and to make recommendation based on the findings of the study
  4. Financial ratio are used for assessing the performance of a particular company over a period of time
  5. For company the performance of a company at the same point in time
  6. To indicate the efficiency with which management utilized the forms of asset to generate sales and profit
  7. It also measure the different of profitability management achieved in term of how well to turned each naira into profit and how well it has used each naira invested in the business to produce those profits
  8. It facilitates both internal the and external analysis of the strength of a firm
  9. Financial ratio enables the management to know changes in performance of the firm affairs from year to year.
  10. It has also show the effectiveness of the firm with the regard to the employment of resources as it proposal.

5.2 Summary

The research work has attempted to highlight the importance of financial statement analysis, using financial ratio to assess management efficiency and performance as a whole, not forgetting its important to outsider e.g. shareholder etc. the basic y1Jes of financial ratio have been used to analyses and interpret the financial statement of first bank of Nigeria plc for the purpose of this research study, the basic types of financial ratio have been segmented into five different group vis, liquidity ratio, probability ratio, efficiency ratio, shareholders investment ratio, and debt and gearing ratio.

The liquidity ratio embraces the current ratio acid ratio or c1uick trust ration as well as the cash ratio. The profitability ratio are made up of gross profit margin, net profit margin return on total assets, return on capital employed ROCE and return of equity.

The efficiency ratio includes fixed assets turnover and net assets turnover. The shareholders investment radio includes the earning per share {EPS}, dividend per share {DPS, dividend cover and finally, the debts and gearing ratio includes the total ratio includes the total debts, ratio and invest coverage ratio.

The researcher have been able to give reasonable and adequate comment on each of these ratio analysis computed based on information gathered from the annual report and account o first bank of Nigeria plc and they 1mve been treated in struck confidences at the end of chapter two where all ratio wets highlighted. The summary of au extract financial statement of the company was analyzed based on the purpose of research.

Borrowing capacity but it will be obvious that if current asset are insufficient to meet current liabilities. i.e there is no working capital, the firm will be unable to pay its debt as they arise, the working capital required must be sufficient to enable the company conduct it normal trade with out shortage of cash to cover consequences.
Most firm inadequate working capital field up in stock although the level stock of a firm depend on the nature of the business investment, if its moving stock it will greatly affect the profitability of the company.

Hence, it is recommended that the company should investment in stock or better still increase it stock turnover. In addition the cash ratio computed for all amount of cash visa vis current liability. If the company is to settle all its current liability with cash it will be unable to do so, cash as the most current assets which is needed for the operation of any business as to be carefully planned.

Storage of cash collection this first hurdle in going about this is to reduce time a customer pays his bill and this time the cheque is collected in situation where customer pay by cheque over all the company my need review its credited to help accelerate cash collected.

Furthermore, the proportion of total funds provided by outsider all the year under study.


5.3 Conclusion

In conclusion the study is able to come up with some reasonable as well as educative price. The combination of the techniques for financial statement analysis brought about the hidden feature of financial statement.

By mere looking at financial statement does not give an investor or analyzed enough information. Despite the fact that financial statement analysis techniques there arc still unresolved issues which remain with the data itself (the financial statement.

Nevertheless, the study brought to the mind of the researcher an opportunity to under take a wider in the field of financial statement analysis as a basic for performance evaluation. It is suggested that further investigation into heavy current liability carries by the lt should be investigated to identify liquid. In conclusion, the first bank of Nigeria plc, management is sufficient and their performance is quite goes and encouraging, It should he emphasis that a continuous assessment of the company performance is important as this will afford the management to mirror their operation and strategies.


5.4 Recommendations

Recommendations as regard the management efficiency and performance are presented as suggested by the analysis carried out from the company, first bank of Nigeria plc for the lack adequate marketing capital. The liquidity ratios calculated for the year covered by the study indicated ability of company’s current asset to efficiency cover the current liability and this effect means that we company may be able to meet its short term obligation when they fall due and this lead to solve such situation.

It should be noted and emphasize however that no hand and fast rules can be laid clown as to the amount of working capital which a firm require specially if such firm has borrowing capacity but it will be obvious that if current asset are insufficient to met current liabilities. i.e. there is no working capital, the will be unable Lo pay its debts as they arise, the working capital required must be sufficiency to enable the company conduct it normal trade without shortage of cash and to cover consequences.

Most firm with inadequate working capital tied up in stock although the level of stock of a firm depend on the nature of the business investment, if its moving stock it will greatly affect of the profitability of the company.
Hence, It is recommended that the company should reduce investment in stock or better still increase it stock turnover. In addition the cash ratio computed for oil amount of cash vis a vis current liabilities. If the company is to settle all its current liability with cash it will be unable to do so, cash as the most currents assets which is needed for the operation of any business has to be carefully planned.

Shortage of cash collection this first hurdle in going about this is to reduce time a customer pays his bill and the time the cheque is collected in situation where customer pay by cheque overall the company ma need review its credit to help accelerate cash collection.

Furthermore, the proportion of total funds provided by outsiders all the year under study.


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