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FINANCIAL
INFORMATION AS A TOOL FOR MANAGEMENT DECISION MAKING
ABSTRACT
This study
examined financial information as a tool for management decision making. In
order to actualize the objectives of the study, various literature and
theoretical issues were discussed. The instrument used for the purpose of this
research was gathered through primary and secondary sources. The primary source
is through questionnaires while the secondary source extracts from textbooks by
different authors, journals and other publications. The mass of information
generated from the questionnaires was summarized in form of table and analyzed
using simple percentage. The researcher administered one hundred (100)
questionnaires to respondents, out of which ninety-five (95) were retrieved for
the purpose of presenting and analyzing responses to issues raise in the
questionnaires. The data collected was analyzed using Z-test statistical tool.
The findings from analysis revealed among other things that there is a
significant relationship between financial information and future performance
of the organization. We therefore recommend that corporate organizations must
encourage changes that engender more transparent communication of information
as to finance based performance measures to users of financial statements.
TABLE OF
CONTENTS
CHAPTER
ONE: INTRODUCTION
1.1
Background of the Study
1.2
Statement of the Research Problem
1.3
Objectives of the
Study
1.4
Hypothesis of the
Study
1.5
Scope of the Study
1.6
Significance of the Study
1.7
Limitation of the
Study
CHAPTER TWO:
LITERATURE REVIEW
2.1
Introduction
2.2
The Manager as a Key Player in Decision-Making
2.3
The Role of Financial Accounting Information
2.4
Information as a Tool for Management Decision Making
2.5
How Managers Acquire and Use Information
CHAPTER THREE:
RESEARCH METHODOLOGY
3.1
Introduction
3.2
Research Design
3.3
Population
3.4
Sample Size
3.5
Sampling Technique
3.6
The Research Instrument
3.7
Method of Data Analysis
CHAPTER FOUR: DATA
ANALYSIS AND INTERPRETATION
4.1
Introduction
4.2
Descriptive Statistics
4.3
Test of Hypothesis
CHAPTER FIVE: SUMMARY OF FINDINGS,
RECOMMENDATION AND CONCLUSION
5.1
Introduction
5.2
Summary of Findings
5.3
Conclusion
5.4
Recommendations
Bibliography
Appendix
CHAPTER
ONE
INTRODUCTION
1.8
BACKGROUND OF THE STUDY
Decision
making process requires information – financial and non-financial information
as well. The most important financial information needed in the process of
business decision comes from accounting. Therefore, we can say that accounting
is a service function to management. It, basically, processes or gathers and
studies “raw data” and converts them into suitable information in the process
of decision making. The basic characteristics of the accounting are: gathering,
processing and presenting accounting (financial) information; information
considering company’s business and those directed towards different interested
users (Zager and Zager, 2006).
Information
plays a crucial role in the decision-making process. In fact, information is a
great commodity in any organizations. Those who are in charge of managing an
organization (i.e. the senior and middle managers) are more concerned with the
concept of information than others (Ghebi, 2001).
The
permanent need for conformability with the new changes has entailed more and
more the availability of the accurate and timely information to the senior
manager of the organizations. Following this, the reasonable monitoring of the
conditions and the allocation improving will result in an efficient management.
The more access a manager or director has to precise information, the more
efficiently he/she can improve strategies and make logical decisions, leading
to more competencies in his/her organization.
The
way a manager makes decisions can be a good benchmark for the efficiency of an
organization. In order to reach high quality decisions, it is necessary to
gather precise and timely information and report and put them at the decision
makers' disposal (Dadkhah, 2004).
Decision-making
is the essence of all activities of a manager. It is, according to Simon
(1994), synonymous with management. In other words, all activities of the
managers relate to the process of decision-making.
According
to researches, timely access to useful and effective information can decrease
the risk of making wrong and inaccurate decisions and can reduce a manager's
uncertainty about the contingent events. Decrease in extra costs, optimal usage
of resources and high productivity are all among the outcome of correct
decisions.
Problems,
like wrong decisions, depend on the trial and error method, uncertainly and
indecisiveness of managers. Problems will be minimal if effective and necessary
information is available (James and Friman, 1996; Asadi, 2003).
1.9
STATEMENT OF THE RESEARCH PROBLEM
It has been realized
that many business organizations fails as a result of management not being
supplied with timely, accurate and adequate financial information for effective
decision making. Even in situations were adequate and accurate financial
information exist, it is often overlook by those who should make good use of
them.
It is very obvious
that, financial information are needed by both management as an insider in an
organization and government, public, trade unions etc as external body to the
organization. But this all important material which aid management and other
users to make precise and inform decision has not be fully appreciated, hence
an evaluation of the important of how it aids users to make inform decisions is
necessary.
Against
this backdrop, the following research questions are raised:
1.
Is there significant relationship between financial information and future
performance of the organization?
2.
Do organization managements rely on financial information before making
decision?
3.
Do investor and other parties take decision base on organization’s financial
information?
1.10
OBJECTIVES OF THE STUDY
The
objective of this study to investigate financial information as a tool for
management decision making.
The
specific objectives are:
1.
To determine if there is significant relationship between financial information
and future performance of the organization.
2.
To verify if organization managements rely on financial information before
making decision.
3.
To find out if investor and other parties take decision base on organization’s
financial information.
1.11
HYPOTHESIS OF THE STUDY
The
hypothesis for this study is;
Hypothesis I
H0: There
is no significant relationship between financial information and future
performance of the organization.
H1: There
is a significant relationship between financial information and future
performance of the organization.
Hypothesis II
H0:
Organization managements do not rely on financial information before making
decision.
H1:
Organization managements rely on financial information before making decision.
Hypothesis III
H0:
Investor and other parties do not take decision base on organization’s
financial information.
H1:
Investor and other parties take decision base on organization’s financial
information.
1.12
SCOPE OF THE STUDY
This
research work examines financial information as a tool for management decision
making.
The
population of the study is the entire quoted companies in the Nigeria Stock
Exchange, while the sample size will be restricted to selected quoted companies
in Nigeria using the simple random sampling technique.
The
length of period covered by the study was five (5) years (2007 – 2011).
Geographically,
the study will be conducted in Benin City, Edo State.
1.13
SIGNIFICANCE OF THE STUDY
There
are several compelling reasons for undertaking this study. It will update
existing body of knowledge by going a step forward in filling many of the
obvious gaps in the controversy of financial information and management
decision making.
It
is therefore expected that the study findings will be if immense benefit to
corporate bodies, policy makers, government regulatory agencies, etc. it will
also prove very useful to researchers, as well as members of the academia.
Besides,
the findings of this study will lay the foundation for other academia and
research students (both home and abroad) to know what evidence exist in
decision making concerning financial information.
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