CAPITAL STRUCTURE AND DIVIDEND POLICY DECISION AND CORPORATE PERFORMANCE

PROJECT TOPIC- CAPITAL STRUCTURE AND DIVIDEND POLICY DECISION AND CORPORATE PERFORMANCE

Abstract

Over the years, the issue of how developing country’s firms decide between the use of debt and equity as source of finance had been a challenge in emerging market and the new patterns of internal and external financing that have evolved in the global market as an entity. The main statistical tool employed in this work is Pearson’s correlation techniques which will be used to establish the relationship between earning price per share and corporate performance. A sample size of 14 was drawn using random sampling techniques. In the research question three hypotheses formulated. The study used Pearson’s correlation method in testing the hypotheses formulated. The study reveals that there is positive relationship between the retained earnings of firms and their EPS; firm’s optimal debt ratio is determined by trade off between gains of borrowing, holding the firms assets and investment plan is constant, Based on the findings the study recommends: that company should endeavour to desist from employing non professionals like chemist, biologist etc and also government should put in place measure to guarantee  economic and political stability.

CHAPTER ONE

INTRODUCTION

  • Background to the Study

The term advertising appears to be well known to every person across all profession consumers and even buyers aspire to know advertising as much as the advertisers. All aspects of business have advertising implication. As it is very imperative for a course of action on the part of the owner of a business, who is just starting or expanding existing ones to make a careful study of how to get the products or services across to the ultimate consumers.

To assure that product will sell itself due to its high quality or measures to the buyer or consumer is wrong.  Modern business has specifically responding to the need for proper communication by responding to the need for proper advertising. One should not fail to mention that small business management occupies a vital and higher percentage of the economy development of a nation.

This is why small scale business management should be given its pride of place and guide with al seriousness to achieve its desire greatness. The competitive nature of business operating in the same industry calls for the need for advertisement to ensure its survival in the same line of industry. However, the survival of a small business management therefore depends on how well the management of such business can discover the need for necessity of advertising.

The case study of Mr. Biggs which find itself in the fast food business can only secure a better edge among her place as there are competitions in the business. The corporate goals or objectives of the institution under study are to justify the owners investment from the profit after tax. Therefore the whole essence of this research work is to help managers and other interest individual to find a place in their organization that is completely responsible for advertising.  

PROJECT TOPIC- CAPITAL STRUCTURE AND DIVIDEND POLICY DECISION AND CORPORATE PERFORMANCE

  • Statement of Problem

Over the years business fails to grow and survive due to lack of poor advertising techniques adopted by enterprises. Advertising management is a crucial issue in a global business due to the complexity of current business environment. These are set out plans and programmes in order to achieve the set of organizational objectives and goals. Advertising require to find in order to design an effective advertising methods which will have a wider coverage in order to reach out to existing customers and potential customers of  the business product or services.

The researcher is of the view to carryout an investigation to find out the constraint of advertising including the growth and survival of enterprise in Nigeria. However preferred solution and solution and recommendation will be made available at the end of this study.

1.3   Research Questions

This research work will attempt to provide answers to the following questions:

  1. What is the effect of advertising on the total demand for Mr. Biggs products?
  2. How does advertising influence the business cycle?
  3. Does advertising widen consumer choice for the product of the firm?
  4. Does advertising increase sales?
  5. Does advertising facilitate the achievement of goals and objective of small scale business management?
  6. Does advertising help to inform and create awareness?

 

1.4   Objectives of Study

This research is aimed at achieving the following objectives:

  1. To determine if advertising has any significant effect on the total demand for Mr. Biggs products.
  2. To examine if advertising has any influence on the business cycle.
  3. To know if advertising has any widen effect on consumer choice for the product of the firm.
  4. To examine if advertising has any significant effect in increasing sales.
  5. To examine if advertising has any significant effect in facilitating the achievement of goals and objective of small scale business management.
  6. To examine if advertising help to inform and create awareness.

 

  • Statement of Hypotheses

With regard to the above, central research question arising from the statements of the problem and the objective of the study, leads to the researcher to the formulation of the following hypothesis. The negative assertion is called the alternative hypothesis (Ho) while the positive assertion is called the null hypothesis (HI).

Hypothesis One

Ho:  Advertising does not facilitate the achievement of goals and objectives of small scale business management.

HI:    Advertising does facilitate the achievement of goals and objectives of small scale business management. 

Hypothesis Two

Ho:  Advertising does not increase sales and profitability.

HI:    Advertising does increase sales and profitability.

Hypothesis Three

Ho:  Advertising does not inform and create awareness.

HI:    Advertising does inform and create awareness.

 

  • Significance of the Study

The objective of this research study is to examine the problem being faced by small scale business of Mr. Biggs enterprise as a result of not having good economic (e.g. market economic) and to suggest good solution to these problems. If this objectives are met, it follows that this work will at the end contribute significantly to the importance of advertising in small scale business management.

This study attempts to produce information to bridge the information needs of the potential and actual investors. Therefore, the following categories will benefit immensely from the findings.

  1. Potential Investor: It will serve as a guide in determining the value of the business that would finally have an influence on their investment decision.
  2. Management: It would expose them to improve practices as well as help to know the importance of advertising in small scale business.
  3. Public: It will enlighten the public on the need for advertising in small scale business management. It will also benefit the public in the area of providing relevant information for the future researchers.
    • Scope of the Study

This study is restricted to the relevance of advertising in the management of small scale business in Nigeria a case study of Mr. Biggs. Due to time and cost constraints the entire Mr. Biggs in Nigeria can not be used for this study. Hence, a sample size of 3 (three) one in Auchi and two in Benin (i.e. one in Sapele Road and one in Ugbowo Road).

The date was obtained using a cross section of Mr. Biggs fast food restaurant in Edo State for the period of 2009 – 2013. 

 

  • Limitations of the Study
  1. Outstanding constraint is the unwillingness on the part of the respondent to give correct and convincing information about their business.
  2. Generalization of result may not be correct since the study was limited to advertising in small scale business enterprise with special emphasis on Mr. Biggs which does constantly represent the performance of all the small scale enterprise in the country.
  3. The smallness of the sample size is also a constraint to this research project.

 

  • Definition of Terms
  1. Advertising: This is the purpose to promote the image of a corporation rather than the sale of a product or service, also called institutional advertising is also use to create public awareness of a corporation or to improve its reputation in the market place. (Brovee, 1992).
  2. Small Scale Business: The federal government small scale industry development plan of 1980 defined a small scale business in Nigeria as any manufacturing process or services industry with a capital not exceeding N150,000 in manufacturing and equipment alone.
  3. Management: Involves ensuring that work activities are completed with highest degree of efficiency and effectives by those responsible for carrying out the responsibilities.
  4. Promotion: The element of the marketing mix that include all forms of marketing communication. It is the ingredients used to inform an persuade the market regarding companies product the market regarding companies product.
  5. Organization: A project, a business of a person or group of persons. A company making and selling things.
  6. Consumer: This is a person or group of persons who are the final users of products or services generated within a social system.

Marketing: This is the process of communicating the value of a product or services to customer for the purpose of selling the product or services. It is a critical business function for attracting customer.

PROJECT TOPIC- CAPITAL STRUCTURE AND DIVIDEND POLICY DECISION AND CORPORATE PERFORMANCE

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CHALLENGES FACING AUDITOR’S INDEPENDENCE IN PRIVATE SECTOR ORGANISATIONS IN NIGERIA

PROJECT TOPIC- CHALLENGES FACING AUDITOR’S INDEPENDENCE IN PRIVATE SECTOR ORGANISATIONS IN NIGERIA

Abstract

The study is aimed at examining the challenges facing auditors’ independence in private sector organizations in Nigeria. The ultimate aim of this research work is to evaluate the impact of auditors’ independence on audited report and increase credibility on the financial statement to the user. The researcher employs primary data (questionnaire and personal interview) in its data collection. It was discovered that closeness in terms of giving management decisions can impair an auditor’s independence and that auditor’s independence has a direct impact on the audit report. Finally, it was recommended that seminars and lectures should be conducted for auditors to enable them appreciate their profession the more to maintain their personal integrity despite the advise situation in the country, knowing fully well that a good name is better that riches.

CHAPTER ONE

INTRODUCTION

  • Background to the Study

Over the past three decades, Nigeria has witnessed a huge growth in its private sector with the development of free enterprise, and influx of foreign corporations (Zhao & Murinde; 2011, Ezeoha, 2007; Ningi & Dutse, 2008). Also, the level of private sector investments increased the need for fairly stated financial statements became more important. This surge in the private sector came along with many positive and negative aspects. The economy witnessed a rapid growth in the level of corruption, and fraud perpetuated by businesses.

This pointed to the need for further governmental efforts to regulate business reporting in the country (Ayoola-Akinjobi, 2010). Auditing is not yet well developed in Nigeria. Currently, there are two accounting bodies, Institute of Chartered Accountants of Nigeria (ICAN) and Association of National Accountants of Nigeria (ANAN), recognized in the country to regulate the practice of accounting, however, ICAN is the oldest and most dominant accounting body in Nigeria.

The house and senate approved a bill to set up a third accounting body (Certified Public Accountants of Nigeria, 1998), but the bill was not signed by President Obasanjo before he left office, and his predecessors are yet to sign the bill into law. While both bodies have witnessed great improvements in their regulation of the practice of accounting in the country, they have not done much in the area of auditing.

Recent reports of questionable accounting practices employed by some companies in Nigeria have brought the issue of auditor independence to the forefront, and put the auditing profession in a serious credibility crisis (Otusanya & Lauwo, 2010). In response to this, the public has called for auditors to be independent of their clients. Audit independence refers to the ability of the external auditor to act with integrity and impartiality during his/her auditing functions.

Two types of auditor independence were developed by Mautz and Sharaf (1961) namely practitioner-independence (or independence in fact), and profession independence (or independence in appearance). Communication of accurate financial statements is vital to the operation of the economy since users of financial statements depend on this information to make financial decisions.

To increase the confidence in their financial statements, companies utilize the services of external independent auditors to audit their books. Independent auditors audit the financial statements and express an opinion on the fairness of the statements. The confidence placed on these statements depends ultimately on the perceptions held by the users of these statements regarding the independence of the external auditors. While the external auditors may in fact be independent of the management of the company being audited, if they are perceived not to be independent, then the value of their opinions to the users of the statements is diminished.

PROJECT TOPIC- CHALLENGES FACING AUDITOR’S INDEPENDENCE IN PRIVATE SECTOR ORGANISATIONS IN NIGERIA

  • Statement of Problem

The concept of independence is a cornerstone of the accounting profession. The main aim of employing the services of an auditor in an organization is to audit the financial statement in order to produce a report that will add credibility to financial report in practical terms if independence of the auditor is in place. This research is to ascertain the challenges facing auditor’s independence on management decision making process and to proffer solutions on the ways forward to enhance auditor’s independence in Nigeria.

1.3   Research Questions

Below are research questions meant to direct the study.

  1. Does the effectiveness of auditor’s independence have an impact on the report given?
  2. Does the increase in credibility on the financial statement have an impact on user?

iii.    To what extent do auditors know and appreciate relevance of independence?

  1. To what extent can one appraise the areas of weakness and strength with a view to making recommendation on possible improvements where necessary?
  2. Of what relevant is the provision by statutory bodies and standard on auditor’s independence?

1.4   Objectives of the Study

The level of reliance on the audited financial statement by the users is not that encouraging due to the ineffectiveness, of auditor’s independence. The aim of this project is to achieve the following objective;

  1. To evaluate the impact of auditors independence on audited report.
  2. To increase credibility on the financial statement to the user.

iii.    To ensure that auditors know and appreciate relevance of independence

  1. To appraise the areas of weakness and strength with a view to making recommendation on possible improvements where necessary.
  2. To assess relevant provision by statutory bodies and standard on auditor’s independence and as certain how credible it has been. If not to evaluate and give necessary suggestions that will help appraise the system.

1.5   Statement of Hypotheses

In order to achieve the objective of this study, the following hypotheses are raised.

Hypothesis One

Ho:  Auditors’ independence does not have a direct impact on the auditor’s report.

HI:    Auditors independence have a direct impact on the auditor’s report.

Hypothesis Two

Ho:  There is no significant relationship between the provision of statutory bodies and auditors independence.

Hi:   There is significant relationship between the provision of statutory bodies and auditors independence.

Hypothesis Three

Ho:  There is no significant relationship between auditors and appreciating relevance of audit independence of auditors in private sector organization in Nigeria. 

Hi:   There is a significant relationship between auditors and appreciating relevance of audit independence of auditors in private sector organization in Nigeria.

Hypothesis Four

Ho:  There is no significant relationship between weakness and strength with improvement on audit dependence to private sector organization in Nigeria.

Hi:   There is a significant relationship between weakness and strength with improvement on audit dependence to private sector organization in Nigeria.

Hypothesis Five

Ho:  There is no significant relationship between the provision of statutory bodies and auditor’s independence to private sector organization in Nigeria.

Hi:   There is a significant relationship between the provision of statutory bodies and auditor’s independence to private sector organization in Nigeria.

1.6   Significance of the Study

This study aims at evaluating the impact of auditor’s independence on audited report and gives insight into the effect to the users of such reports. It is also to assess relevant provision by statutory bodies and standard on auditor’s independence and ascertain how credible it has been.

1.7 Scope of the Study

This research focuses on the independence of auditors and its impact on audit report in accounting and its scope is centered on selected audit firms in the country using some audit firms in Benin City, Edo state as case study. The study covers the range between 2008 -2013 and the sample size of 30 is used for the population.

1.8   Limitations of the Study

The limitation of this study was the difficulty in getting relevant journals that is related to the area of study.

1.9   Definition of Terms

Audit: it is a process carried out by suitably qualified auditor where the accounts of business entities, including limited companies, charities trusts and professional firms are subjected to scrutiny in such details as will enable the auditor.

Auditing: It is defined as the process by which a competent qualified independent person accumulates and evaluates evidence about quantifiable information relating to a specific economic entity for the purpose of ascertaining the compliance with any relevant statutory obligation.

Auditor: Is an auditor as an expert accountant who makes an examination of accounting data in order to form his opinion as to the reliability of those data.
Independence: This is the independence of the auditors mind in order to form an objective opinion of the financial statement examined by him without any direct interference from his client.

True and fair view: This means accounts prepare in accordance to the generally accepted accounting principles.

Audit Report: This is the opinion of the auditor after due examination of the financial statements. Audit report is a written summary of the findings of the auditors during their audit work along with their opinion on such findings. The report may either be the domestic report also called letter of weakness addresses to owners of the organization (in case of company’s shareholders).

PROJECT TOPIC- CHALLENGES FACING AUDITOR’S INDEPENDENCE IN PRIVATE SECTOR ORGANISATIONS IN NIGERIA

CORPORATE GOVERNANCE: A TOOL FOR DIRECTING AND MANAGING BUSINESS EFFICIENCY AND SURVIVAL

PROJECT TOPIC- CORPORATE GOVERNANCE: A TOOL FOR DIRECTING AND MANAGING BUSINESS EFFICIENCY AND SURVIVAL

CHAPTER ONE

INTRODUCTION

1.1   Background to the Study

Corporate governance has been defined as the way and manner in which the affairs of companies are conducted by those charged with the responsibility. It is a system that ensures optimal utilization of resources for the benefits of shareholders while meeting societal expectations. Given the high correlation between corporate governance and investor decisions, the government of Nigerian is keen to position the country to take advantage of the opportunities in the global market by adhering to principle of good governance, thus, Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (CAC) came out with seventeen (17) member committee and drafted the code of best practices for corporate governance in Nigeria.

Depending of the jurisdiction, different bodies may have responsibility of corporate governance, board of Directors, Audit Committee and other supervision committees. International Standards on Auditing (ISA) 260, requires the auditor to determine those persons charged with corporate governance. The most direct of corporate governance is to shareholders. However, the ultimate benefit is the more efficient allocation of capital to its most productive uses.

In the real sense, no governance system, no matter how well designed, will fully prevent greedy and dishonest people from putting their personal interests ahead of the interests of the companies they manage. Many steps can be taken to improve corporate governance and thereby reduce opportunities for accounting fraud. This is where the role of auditing (through proper audit reports) comes into play.

The auditor does not have a direct corporate governance responsibility, but rather provides a check on the information aspects of the governance system. The role of auditors in corporate governance involves reporting, decision making, accountability and monitoring. Decision requires relevant and reliable information, accountability involves measuring, reporting and transparency, and monitoring includes system and feedback.

Auditor’s primary role is to check whether the financial information given to investors is reliable, i.e. if its expressed the true and image of the organization. The objective of an audit is to express an expert opinion on the fairness with which the financial statement are prepared and presented, in all material aspects a company’s financial position, results of operations, and cash flow in conformity with GAAP to be able to express such an opinion. This must be done using sound auditing techniques.

People rely on financial statements to make economic decision, especially the shareholders, that is, an enterprise outside the organization. With the help of audit work by the external auditor, risk and uncertainty are reduced. Error and fraud can cause irregularity in the case of financial report or statement of any organization. It is the responsibility of the auditor to verify the cause of any irregularity of the auditor to verify the cause of any irregularities in the financial statement.

One perception to corporate failures has been to focus on public companies internal controls. Sarbanes-Oxley Act (2002) (SOX) requires a separate report on the effectiveness of internal controls. Recent changes to ISAs place a much higher focus on the auditors understanding internal controls as a part of the audit. Corporate governance is nothing more than how a corporation is administered or controlled.

Corporate governance takes into consideration company stakeholders as governmental participants, the principle participating being shareholders, company management, and the board of directors. Adjunct participant may include employees and suppliers, partners, customers, governmental and professional organization regulators and the community in which the corporation has a presence.

There are so many interested parties, its inefficient to allow them to control the company directly. Instead, the corporation operates under a system of regulations that allow stakeholders to have a voice in the corporation commensurate with their stake, yet allow the corporation to continue operating in an efficient manner. Corporate governance also takes into account audit procedures, in order to monitor outcomes and how closely they adhere to goals, and to motivate the organization as a whole to work toward corporate goals, by using corporate governance procedures widely and sharing results, a corporate can motivate all stakeholders to work toward the corporation goals by demonstrating the benefits to stakeholders of the corporation success.

According to Alfaki (2005), corporate governance are the rules and practices that govern the relationship between managers and shareholders contributes not only to the growth and financial stability of corporate enterprise but also promotes financial intensity and economic efficiencies.

PROJECT TOPIC- CORPORATE GOVERNANCE: A TOOL FOR DIRECTING AND MANAGING BUSINESS EFFICIENCY AND SURVIVAL

1.2   Statement of Problem

In Nigeria like most countries, the failure of companies can be due to internal or external factors or in rare cases, the combination of both which basically has to do with poor corporate governance. The researcher intends to focus on reforms as aspect of corporate governance and indicators of business failure as well as the linkage between the two concepts. The study also intends to raise the consciousness and institutionalize good corporate governance and business sustainability. For effective corporate governance reduces “control rights” shareholders and creditors confer on managers, increasing the probability that managers invest in positive net present value projects

1.3   Research Questions

In the study the following research questions are asked in order to achieve the objectives of the studies

  1. Does corporate governance affects vital issue of firm’s performance?
  2. Is corporate governance essential in achieving public confidence in corporate entities?

iii.    Is company failure a result of non existence of corporate governance?

 

1.4   Objectives of the Study

The primary objectives of this study are:

  1. To find out if corporate governance affects vital issue of firm’s performance.
  2. To ascertain if corporate governance is essential in achieving public confidence in corporate entities.

iii.    To determine if company failure is as a result of non existence of corporate governance.

1.5   Research Hypotheses

Hypothesis One

HO:   Corporate governance affects vital issue of firm’s performance

HI:    There is no significant relationship between corporate governance and firm performance.

Hypothesis Two

Ho:  The effect of corporate governance is not essential in achieving public confidence in corporate entities

HI:    The effect of corporate governance is essential in achieving public confidence in corporate entities.

1.6   Significance of the Study

In regards to the relevance of the study it covers areas which are useful to the board of directors as regard to their mission, vision, objectives and strategy of a company. It is relevance to shareholders by booming their confidence to invest in a particular business which involves protecting their rights.

Companies will benefit as it ensures, the financial availability business. It also indicates that the way in which companies are directed and controlled through governance principles of disclosure and accountability of a company. It is also relevant to the public sector. Public sector will benefit as it will ultimately improve economic growth and functional position of the country on a global level. It is also used as a determinant in developing policy, social economic analysis and poverty resolute issue.

1.7   Scope of the Study

This study examines corporate governance and firm’s performance using Guinness Nigeria Plc as a case study. This research essentially focuses on the process and structure in which firm performance and corporate governance are directed, manage and controlled. A time frame of 5 years was used which range from 2010 to 2015. For effective correlation, a sample size of 100 was used.

1.8   Limitations of the Study

The study certainly suffers from a number of limitations prominent among them includes:

  1. Primary data collected by previous researcher could have been manipulated hence, altering good conclusion in that could have been drawn from them.
  2. Sizeable quality of information obtained from papers were in pigmentation and sometimes complex.
  3. Reduction of the respondent to full the Questionnaire
  4. Limited literature in this area of study
  5. Sizeable quantity of information obtained from papers were in fragmentations and sometimes complex.
  6. Reluctant of the respondent to fill the questionnaires.

1.9   Definition of Terms

Management: Is a distinct process consisting of planning, organization, starring, directing, coordinating, reporting and budgeting, performed to determine and accomplished stated objectives with the effective use or human being and other resources.

Cooperation: Cooperation is a big company or group of companies acting together as a single organization for a particular purpose with a legal entity distinct from its owners.

Strategic Planning: Strategic planning is a process of determining the major objective of an organization and the policies and strategies that will govern the acquisition, use disposition of reassures to achieve set objectives.

Planning: Planning is the establishing of objectives and the formulation, evaluation and selection of policies strategies, faction and actions required to achieve set objective.

Efficiency: A level of performance that describe a process that uses the lowest amount of inputs to create the greater amount of outputs.

Business: An economic system in which goods and services are exchanged for one another or money, on the basis of their perceived worth.

PROJECT TOPIC- CORPORATE GOVERNANCE: A TOOL FOR DIRECTING AND MANAGING BUSINESS EFFICIENCY AND SURVIVAL

THE IMPACT OF CASH-FLOW STATEMENT ON CORPORATE ORGANIZATION

 

 

Abstract

This research work critically examines the impact of cash flow statement in an organization. The broad objective of this study is to examine the relationship between operating cash flows and corporate performance and also to examine the correlation between investing cash flows and corporate performance. The primary source of data collection was used in the study and data for the study were collected through the use of questionnaire. 60 questions were administered and fifty eight (58) were returned. The responses were then analyzed using the simple percentage method and the chi-square denote by a Greek symbol (X2) to test the hypothesis. The findings showed that there is a significant relationship between cash flow statement and corporate investment and that cash-flow statement impact on organization performance. However, it was recommended that in improving their performance and cash flow, corporation should seek to improve their investment policy since increase investment lead to more cash flows for the organization

 

CHAPTER ONE

INTRODUCTION

Background to the Study

Cash flow of a company is a crucial factor that enhances its operations. According to Efobi (2008), Due to the relevance of cash flows in the company’s operations and performance, corporate organizations need to develop a suitable cash flow mix and apply it in order to maximize shareholders values. Uremadu (2004) sees cash flows of an organization as those pool of funds that the company commits to its fixed assets, inventories, account receivables and marketable securities” that lead to corporate profit. The ability of the company to effectively choose adequate source of funds to finance its operations will differentiate strong cash flow governance and poorly managed cash flows (Efobi, 2008). For the cash flows to be well structured and effectively utilized, a business firm must be able to devise various ways for selecting the best components of its cash flows which would be used in the company’s operation to raise its productivity or achieve performance. This process should be based on the criteria well drawn up by the finance manager after making a careful financial planning and control for the company (Uremadu, 2004).

Cash flow is an index of the money that is actually received by or paid out by a firm for certain time period (Albrecht, 2003). This index is not inclusive of non-cash accounting charges such as depreciation. Cash represents the firm’s vascular system, if it dwindles, the business will not survive. The fact that a firm is profitable does not mean that it is also solvent. The profit is not cash. The solvency, flexibility and the financial performance of the firm are set on the firm’s ability to generate positive cash flows from the operating, investing and financing activities (Turcas, 2011). Cash flows represent all inputs and outputs liquidities and cash equivalents. Liquidities represent cash on hand and demand deposits. Cash equivalents are short-term investments with a liquidity degree that can be easily converted into cash with an insignificant risk of value change.

According to Adelegan (2003), cash flows are more direct measure of liquidity and a contributing factor in corporate performance. Cash flow information assists its financial statement users in obtaining the relevant information concerning the use of resources of virtually the entire financial resources over a given time period (Ross, 2007). Financial statements translate the financial activity of the enterprise into a more or less objective set of numbers, which provide valuable information about the firm’s performance and about its possible problems and its potential in the future (Turcas, 2011). The importance of cash flows cannot be overemphasized mainly because the users of accounting information are particularly interested in the cash of the company that is published) in its financial statements (Narkabtee, 2000). According to Bodie (2004), internally, managers need to know the current financial position of the firm (performance and problem), continuing with problems and control functions. According to Fabozzi and Markomits (2006), suppliers are interested in the firm’s liquidity because their rights are generally on a short term and in this case the company’s ability to pay is best reflected by the liquidity indicators. According to Bragg (2002), investors in bounds, who ordinarily lend the firm on medium or long term for remuneration, are rather interested in the company’s ability to generate cash flow for medium and long-term coverage of debt service.

 

THE IMPACT OF CASH-FLOW STATEMENT ON CORPORATE ORGANIZATION

 

1.2   Statement of Problem

According to Pitman (2010), cash flow does not always coincides with cash outflows. Thus, in some periods, cash will flow in than out and at other times, cashflows out than in. if receipts and payments period could be matched perfectly and forecast with certainty than a firm need no cash balance.

Pitman (2010) went further I say that shortage of cash curtail the operations of the firm which usually manifest inability of the organization to pay bills when due and the dissipation of assets. Persistence of cash shortage can lead to financial insolvency which may subsequently lead to litigation of the organization. If there is too much cash, it is not invested, then the firm is paying directly or indirectly for money that is not using. The organization losses to earnings, interests and run the risks of keeping the liquid fund (cash). The problem that faces management is how to maintain and control optimum cash balances despite the difficulties in cashflows.

Pitman (2010) also stated that the importance of cash as an asset of a firm cannot be over emphasized with out cash, that is, where is short is supply, the normal flows of operation of the corporation flows are directly productive, it is sterile. It neither produces goods for sale or induces customers to buy as if the case of other assets, fixed assets, inventories and account receivable.

In current practice, including the ambiguity of terms such as funds, lack of comparability arising from diversity in the focus of the statement (cash, cash and short term investment, quick assets, or working capital) and resulting differences in definition of funds flows from operating activities

 

THE IMPACT OF CASH-FLOW STATEMENT ON CORPORATE ORGANIZATION