Financial statements analysis and investment decisions in nigerian banks (a study of diamond bank plc)

Abstract

The annual financial report provided by the accounting system is considered the main source of information for investment decision making. It is therefore important for the banking sector to fully disclose matters concerning their operations. Hence, the validity and accuracy of the decisions depend on the proper analysis of financial statements. Investment decision makers rely on information obtained from financial statements to predict profit margins, Return on capital employed, return on investments, etc. Without financial statements, it will be difficult to determine the profit and evaluation of the performance of the banking sector and companies. It is necessary that Accountants take further steps in ensuring that the true and fair view of the actual worth of businesses are also incorporated in the financial statements published by them. This study aims at ascertaining the relevance of financial statement analysis on investment decisions in the Nigerian banking sector with emphasis on Diamond Bank Plc. The target population of the study is 150 respondents from Diamond bank main branch and sample size of 110 respondents was determined using Taro Yamane's formula. Stratified random sampling was used to determine the respondents. The study used both primary and secondary data, including interview and annual reports of Diamond Bank Plc. Data collected was analyzed using SPSS version 21. Data analysis involved statistical computations for averages, percentages, and correlation and regression analysis. The study established that financial statement analysis is very important for investment decision making. It is recommended that commercial banks devise a self-assessment form with benchmarks on the key areas of assessments to be codified within a document for clients to read and use it for self-assessment. From such assessment, banks can develop categories for customers, based on the investment decision making, the security expected and term of the investment. This would serve to minimize the time taken in investment decision analysis.