THE EFFECTS OF FINANCIAL ACCOUNTING REPORTING ON MANAGERIAL DECISION MAKING

CHAPTER ONE
INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Financial reports provides an overview of a business profitability and financial condition in both short and long term. They are necessary sources of accounting information about companies for wide variety of users. In. every business, there, needs information. This information needs ranges from financial, production, marketing etc. Generally, the larger the organization the greater the management need for information. Financial report plays a vital role in decision making process of business organizations. The main purpose of financial reports is the provision of financial information as a record making. It has been said that accounting is the language of business. It might also be said that the ability to apply accounting knowledge is critical to success in business: A business prepares various report at the end of each fiscal period. This report summarizes the changes that have taken place during the period. For this financial report to be useful, the data be presented in such a way that the user will recognize, Similarities, differences and trends form one period to another to enable them make decisions. The accounting information contained in the financial reports enables management to make more inform decisions. Financial report should provide adequate information in all areas of organization and economic activities; it should be able to disclose clearly the nature and accurate accounts of the transactions fun which the true and fair view financial position of the organization can be ascertained. Financial reports serve a lot of useful purpose to different users namely, shareholders, Creditors, Banks, government agents, employees, potential investors and the management of the entity it self. The above identified groups of persons rely on the information supplied by the given firm through financial reporting in which they have interest to ascertain the organization‟s state of affairs which serves as an important guide in deciding the extent to which they commit their fund. It is the “communication of financial information useful for decision making such as investment, credit and other business decisions” such communication include, general. Purpose financial statement, balance sheet, equity report, cash flow reports and notes to these statements.

1.2 STATEMENT OF THE PROBLEM

The problem of this research is that, the management does not know the various ways of presenting financial accounting reporting, which often affects managerial decision making. There are no proper allocation of resources of the organization which leads to non-achievement of the profit maximization objective. Also the inability of the management to recruit trained and professional personnel, as a result, the quality of the decision made by this organization are very poor.

1.3 OBJECTIVE OF THE STUDY

The research work covers the effect of financial accounting reporting on managerial decision making.
The studies have the following objectives:
To know whether the various ways of presenting financial accounting reporting have any effect on managerial decision making in the company.
To examine the attitude of management in the allocation of resources which often leads to achievement of profit maximization objective.
To determine the level of which management recruit trained and professional personnel which leads to quality decision making.

1.4 RESEARCH QUESTIONS

Based on the objectives, the following research questions were developed:
Does the various ways of presenting financial accounting reporting have any effect on managerial decision making of the company?
What are the attitude of management in the allocation of resources which often leads to profit maximization objective?
To what extent does management recruit trained and professional personnel which leads to quality decision making?

1.5 STATEMENT OF HYPOTHESIS

Because of the above research questions, the following hypotheses were formulated.
HYPOTHESES 1
HO: The various ways of presenting financial accounting reporting does not have effect on managerial decision making of the company.
HI: The various ways of presenting financial accounting reporting have effect on managerial making of the company.
HYPOTHESIS 2
HO: There are no proper allocation of management resources which often leads to profit maximization objective.
HI: There are proper allocation of management resources which often leads to profit to profit maximization objective.

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