Abstract                

Corporate organizations owe a duty to fully disclose matters concerning their operations so  as  to  aid  investors  in  making  investment  decisions  because decision  makers  rely  on  information  obtained  from  financial statements  to  predict  future  rates  of  return.

Without  the  financial  statement, there  will  be  a  problem  of  how  to  determine  the  profit  of  a  company,  and evaluation of performance of a company. The general objective is to ascertain the role of financial statement in decision making.

The study will be based on survey and secondary data which will be used to gather information. The methods used in analyzing this study are financial ratios.

We  discovered  from  the  test  of  hypotheses  that  financial  statement  is relied upon in investment decision making and financial statements are useful for forecasting company’s performance.

Conclusions were drawn based on the findings that financial statement plays a vital role in decision  making  and recommends  that no decision  should  be  taken  without  the consideration of a company’s financial statements.

CHAPTER ONE

GENERAL INTRODUCTION

1.0 Introduction

The primary objectives of every business are profitability and solvency.  Profitability is the ability of a business to make profit, while solvency is the ability of a business to pay debts as they come due (Hermanson et al, 1992: 824).

However, the achievement of these objectives requires efficient management of resources of the business through planning, budgeting, forecasting, control, and decision – making.

Also, the strength and weakness of the business need to be identified and necessary corrective measures applied.  Interestingly, financial statements provide information that facilitates these functions.

Basically, financial statement analysis communicates financial and economic information needed for decision –making.  Thus, the American Accounting Association (in Okezie, 2002:1) defined financial information (accounting information) as “the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the information”.

According to Wikipedia, a financial statement (or financial report) is a formal record of the financial activities of a business, person or other entity. Financial statement analysis is the process of understanding the risk and profitability of a firm (business, sub-business or project) by Wikipedia the free Encyclopedia

Although profits are often used as the basis for judging the performance of a business, such profits must be related to the various items of the financial statements in order to be meaningful and useful for decision making.

Furthermore, owing to the technicalities involved in the procession, interpretation and publication of financial information in a summarized nature in financial statements, a lot of truths are hidden in them.

Thus, they need to be analyzed and interpreted by means of financial ratios to enable the users understand the meaning of the absolute amounts shown in them, and make informed business decisions.

In this regard, financial statements carry lots of financial Information that are hidden in the figures. The figures in financial statements become more useful when they are related to each other or to some other relevant financial data. Therefore, users of financial information go a further step to establish relationships (or ratios) among selected data in financial statements. This was observed by Essien (2006:144)

“Financial (accounting) ratio is a proportion or fraction or percentage expressing the relationship between one item in a set financial statements and another item in the financial statements. Financial ratios are the most powerful of all tools used in analyzing and interpreting financial statements” (According to Igben (1999:423).

Therefore, ratio analysis involves taking statics of number (or items) out of financial statements and forming ratios with them, to enhance informed judgments and decisions (Lasher, 1997:66). Remarkably, one of the effective ways of providing information needed for decision-making is ratio analysis.

Business decisions of make or buy, investment or divestment, expansion or contraction, capital-organization and reconstruction, and so on cannot be properly made without the aid of financial ratios. They give cue to the financial strengths and weaknesses of a business, and highlight aspects of a business requiring further investigation.

Therefore, this research is carried out to show how financial statement analysis help users such managers, shareholders, investors, creditors, and other stakeholders make informed judgments and decisions about the past performance, present operations, and futures potential of the business.

1.1 Historical Background

Les Sociétés Anonymes des Brasseries du Cameroun (SABC) is a brewery firm in the manufacturing sector and the brewery industry of the Cameroon economy. The brewery industry in Cameroon is composed of three major players (companies) among which are: Société Anonymes des Brasseries du Cameroun (SABC), Guinness Cameroon S.A. and Union Camerounaise de Brasseries (UCB) S.A.

Les Sociétés des Brasseries du Cameroun (SABC) was found in 1948 as a subsidiary of the French company Les Brasseries et Glaceries D’Indochine (BGI). The company’s first factory was constructed in Douala.

It later on open other factories in Yaounde, then Garoua, followed by Bafoussam and several distribution centres in Ombe (Limbe) and in several other regions in Cameroon. As a result of the growth and healthy profit, the company diversified it lines of operations by including Tangui Mineral Water and a Glass Bottle plant.

Les Brasseries du Cameroun was the only provider of bottles within Cameroon, so even its competitors relied on it for these (Siaka, 2000). Before the coming up of competitors, SABC had been enjoying monopoly on the Cameroonian market since its creation until 1982 when Nouvelle Brasseries Africaines (NOBRA) started production. In 1987, les Brasseries intensified its activities.

However, ‘La Crise’, a nation wide recession, hit the Cameroon economy that same year and SABC struggled to remain profitable for the later part of the next decade.

The company’s multiple factories gave it a decision edge over its competitors by greatly easing distribution across the country. By 1993, the crises forced SABC to close its Limbe distribution centre leaving other plants untouched. As Cameroon’s economy started recovering by 1995, SABC recovered as well.

This was partially due to increased utilization of locally available materials such as maize, instead of imported barley. By 1997, the company’s financial situation was comparable to what it had been a decade earlier although the number of bottles brewed was only about half of what it had been in 1987.

Les Brasseries du Cameroun’s parent company, BGI was purchased by the Castel Group, a company better known for its wines in 1990. By the end of the decade, Les Brasseries had captured 70% of Cameroon’s alcoholic beverage market and 80% of the soft drink.

In 1994, SABC’s figures indicated that the brewery had produced 207.5 million litters. As at this time, Les Brasseries du Cameroun’s share capital had the following major shareholders; Les Brasseries et Glaceries D’Indochine (BGI) owns 75% share, Heineken owns 8.8% shares and Cameroon’s president Paul Biya is another major shareholder. SABC is also noted for its successful marketing and takeover strategies. It has put in place a very dynamic and strong marketing and sales department with credible staff. SABC is noted for having acquired quite a good number of brands from other manufacturers among which are: Mutzig, Extra Dry and Gin tonic.

By September 2008, SABC announced its acquisition of the majority shares in SIAC – Isenbeck, which was the subsidiary of the Germany based group Warstener. This was because of the significant setbacks suffered by SIAC (established about a decade ago in Cameroon) a few years later.

Les Sociétés Anonymes des Brasseries du Cameroun (SABC) brew bottles and distribute several brands of beer including, “33” Export, Beaufort, Castel and Tuborg as well as three beers from De Hooiberg (The Haystack): Amstel, Heineken (since 2005) and Mutzig beer. SABC also bottles and distributes Coca-cola products in Cameroon and other local soft drinks whose trademark includes; Top (Anana, Orange, Grenadine, Pamplemouse), Sprite, Tonic, Vinto Juice and Djino and Tangui mineral water. T

oday, SABC holds about 75% share of the Cameroonian market for beer and soft drinks. Its sales for 2010 stood at 230,517million FCFA for the alcoholic market with profits of 22,325million FCFA. These sales came primarily from within Cameroon (95%) with the other 5% from its export to Chad, Gabon, and Equatorial Guinea.

At industry level, Les Brasseries du Cameroun is the leading brewery firm in terms of the number of products available in the market, sales/distribution units, production volume, number of employees and sales value. It has also employ good marketing techniques to help it maintain its position in this industry among which includes concerts, sponsoring and promotional sales.

As to its social activities, SABC owns a Cameroonian football school and is a major sponsor of the Cameroonian National football team. Since 1994, SABC has been running a football school in Douala called L’Ecole de football des Brasseries du Cameroun (EFBC) out of which most of the renowned Cameroonian football players was trained.

Organisational Structure

The Board of Directors of SABC are in charge of overseeing the operations of the company and also in charge of setting the goals/objectives, policies, rules and regulation of the company.

The BOD are directly assisted by General Manager. They help the BOD in enforcing the strategic policies and plans of the company.

The Director General of SABC is in charge of the overall planning and control (strategic decision making) of the activities SABC. His duties include setting up of good and achievable targets for the entire SABC, and also to ensure that authority delegated is exercise for the prosperity of the firm.

Comments on the company’s past threats and how opportunities where exploited are also expected of him. The director General of SABC is assisted by three General Assistant of Administration, Commercial and Industrial.

Each of these general assistants is expected to oversee the activities related to his or her sector.

General Assistant for Administration is concern with financials, security, auditing, taxes and jurisdiction and legal issues of SABC. He is being assisted by five Directors of the above listed focus.

The General assistant for Commercial, marketing and Exploitation and Logistic is assisted by three directors each in the above duties.

General Assistant for Industrial works is concern with technical functioning (mechanical works and security at work), process and quality (of equipments). Also have four directors for the respective disciplines.

1.2 Statement of Problem   

In today’s society, every person is involve is one or two business activities for survival.

The performance of such business depends on how it is managed and the financial decisions taken and implemented. A good business decision depends on its past, present record.

As such all business entities do keep records to examine their performance in the next accounting year. The validity of these statements depends on how it is being analyzed.

Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn.

However, it must be noted that financial statements are means to an end, not an end in themselves. Thus the use of financial statements analysis in decision making is not always easy owing to the following problems:

1. Many users of financial statements are not knowledgeable about financial ratios
2. Others do not know how the ratios can be applied to financial statements to aid decision-making.
3. Others are not aware of how the ratios can be used to evaluate the performance of the organization.

1.3 Research Questions

The above listed problems give rise to research questions which will be answered in the course of this study.

According to Uzoagulu [1998; 96], research questions guide the researcher in constructing the questionnaires.

The study will therefore be based to provide answers to the following questions:

1. What are the impacts of financial statement analysis on decision making on manufacturing companies?
2. What are the problems associated to financial statement analysis?
3. What is the importance of financial statement analysis to its users?

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