EFFECT OF FINANCIAL STATEMENT ANALYSIS ON INVESTMENT DECISION MAKING. A CASE OF BANK OF KIGALI
Journal Title: European Journal of Business and Social Sciences - Year 2016, Vol 5, Issue 6
Abstract
One of important assumptions in decision making process and improvement economy is existence of quality information. Significant number of this information comes from accounting information systems and from financial statements. Financial statements have to provide realistic and objective picture of realistic business condition of certain company. There are numerous factors that affect the decision making of an investment plan. Financial Reporting Standards and Practices have in the recent past come under great criticisms, demanding that accountants take further steps in ensuring that the true and fair view of the actual worth of business are also incorporated in the financial statements published by them. The general objective was to examine the effect of financial statements in investment decision making by commercial banks using Bank of Kigali as the case study. The study adopted a descriptive survey design. The target population of the study was 150 respondents from bank of Kigali main branch. The sample size of 110 respondents was determined using Yamane’s formula. Stratified random sampling was used to determine the sample size. The study used both primary and secondary data, where questionnaires, interview and annual reports of BK were used. Primary data for the study was collected using structured questionnaires that were administered to the respondents. Quantitative data obtained from close ended questions will be analyzed by using descriptive statistics. Narrative data obtained from interviews and open ended questions in the questionnaire were analyzed using qualitative approaches. Data collected was analyzed through SPSS version 21. Data analysis involved statistical computations for averages, percentages, and correlation and regression analysis. Descriptive and inferential statistics and content analysis was used for specific data. The study established that financial statement analysis is the single most important statement in investment decision making. The study concludes that, a combined 82% of the investment decision making are based on financial statements analysis as indicated in the measure of association, while 18% can be said to go to other factors. The study satisfied the objectives of the study which focused on establishing the extent of use of financial statements in investment decisions making. The study recommends 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 on the time taken in investment decision analysis.
Authors and Affiliations
Mukarushema Vestine| Jomo Kenyatta University of Agriculture and Technology, Kigali, Rwanda, Julius Warren Kule (PhD)| Jomo Kenyatta University of Agriculture and Technology, Kigali, Rwanda, Dr. Mbabazi Mbabazize| Jomo Kenyatta University of Agriculture and Technology, Kigali, Rwanda
Keywords
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