INTRODUCTION

This study has five chapters. In chapter one, we start with the general introduction which is the background of the study, research questions, objectives, hypothesis and the significance of the study. In chapter two is the literal review of the study, overview of theories, conceptual issues and empirical frame work. In chapter three it comes with the methodology of the study and presentation and discussion of findings in chapter four and finally with the summary of the whole work, conclusions and recommendations in chapter five.

1.2 BACKGROUND OF THE STUDY

In modern condition, financial statement analysis is the most complete, objective and reliable information based on which one can form an opinion on the property and financial position of a company (Thalassinos and Liapis, 2014), That is why the performance of a company or an enterprise is determined from its financial analysis statement. The modern business organizations find itself in the atmosphere of uncertainties locally and internationally which has paced a great demand for a company’s financial analysis statement to access the performance of a company,

Financial analysis can be defined as the process of evaluating the financial condition of a company by analyzing its profitability, viability and stability (Sultan, 2014, Ravinda and Anita, 2013). It is performed by professionals who prepare reports using ratios that make use of information from the financial statements and other reports. These financial ratios allow business managers and investors to establish logical mathematics relationship between variables that are listed in the financial statement. The main sources of financial information for a company will be the four primary financial statement which are the balanced sheet statement, income statement, the statement of stockholder’s equity and statement of cash flows and it is perform by professional and mostly in the accounting department.

According to Gill, (1999), financial statements are the principal means of reporting financial information for internal and external users. It is use externally by investors, customers, competitors, government, investment analyst, lenders or creditors who have different interest with it. For example, investors, creditors, market analyst use it to evaluate a company’s financial health and earning potentials which help them not to invest in companies who are financially not stable. It is also use internally by managers, shareholders or owners of companies, employees

Financial analysis objective is to offer evidences related to financial position, the attainment of expected outcomes and ability of a company (Barry and Jamie, 2011) and also provide information about the financial position of the business on a given date and giving insight of its performance, operations and cash flows.

The evolution of financial analysis statement analysis can be traced from the last stages of America’s drive to industrial maturity in the last half of the nineteenth century as management enterprises in various industrial sectors transferred from enterprising capitalist to the professional managers and as financial sector became a more predominant force in the economy. Moving further back in the   books of history we can see that, it started from clay tablets and now to cloud accounting and finance have evolved as thee business environment changes. Moving back to the barter and trade system of business people thought of putting business information in to books that’s when book keeping emerged and ledger recordings were it was read as narratives with dates and descriptions of trades made and were kept individually.

As currencies became available and trades men and merchants began to build material wealth, book keeping also evolved. Italian mathematicians and Franciscan Friar Luca Bartolomeo de Piccolo made basis in the system of bookkeeping with journals and ledgers. He laid down the groundwork for modern accounting and also the benefit of double entry of bookkeeping. His main idea was to list an entity’s resources separately from any claims upon those resources by other entities in other words creating a balance sheet with separate debits and credits. His innovative ideas made book keeping more efficient and showed a clearer picture of a company’s strength. Book keeping migrated to America and was referred to as accounting which they were still doing basic calculations and data entry which were mostly of small businesses. As of the appearance of corporations in America and the creation of the railroad which to take people and goods to their destinations they needed distribution network, shipping schedule, fare collection, competitive rates and ways to evaluate all this efficiently, they had to adopt accounting with its cost estimates, financial statements, operating ratios, production reports to businesses to determine their performance and to make further decisions which they were not use to of it confused them a lot. People made investments without the knowledge of the company’s performance that is they invest either by knowing the owner of the corporation or by family relations or being encouraged by friends.

Moving forward to the 2oth century the U.S.A ratified the 16^th amendment in 1913 of the constitution creating the federal income tax which required accounts skyrockets, also in the Federal Reserve Bulletin of (1917) issued a Uniform Accounting which promoted accounting uniformity which made accounting choice to professional judgment. More to that following the crash in the stock market of (1929), the U.S.A congress passed a Security Act of 1933 and Security Exchange Act of 1934 which prohibited deceit misrepresentation and other sales of securities. It also established the Security and Exchange Commission giving it broad powers to oversee and regulate the security industry. This act also empowered the SEC to require reporting information of companies with publicly traded securities. To attract more capital to expand their operations, corporations began to their financials in the form of balance sheet, income statement, and cash flow statements. Investments capital from sources outside became more important since it increased the range of operations and profits for most operations and this made financial statements more apparent. This profession of accounting was recognized in 1896 with law stating the Certified Public Accountant which is given to people who pass state exams and three years of experience in the field.

Changes in technology makes accounting today easy in keeping detailed records of cash or commodities of the corporations. The introduction of machine in 1890 helped accountants to calculate receipts faster, reconcile their books and when the IBM released in (1952) accountants was among the first to use and improvements in technology has taken accounting to the realm of computer software helping accountants to ease the presentations of financial in time.

In Cameroon is primarily base on the international financial reporting standard (IFRS) issued by the international accounting standard board. The adaption of IFRS ensures consistency and comparability of financial statement across different jurisdiction

1.3 PROBLEM STATEMENT

Performances in micro finance have been relatively slow due to negligence or the unawareness in the importance of analyzing financial statement. Most institutions are still very ignorant of the benefits of analyzing financial statement there by limiting their knowledge of financial viability. One of the major reasons of the use of financial statement is to minimize risk, failure, uncertainties and to stay ahead of competitors. Therefore, enterprises need to provide an accurate financial analysis statement (which is a tool to determine whether a business will continue or discontinue its main operations). Considering the fact that microfinances are mostly made up of the poor, and also regarding the fact that their mission, which is to improve the living standard of its members. Hence an improper analysis of the financial statement will not only lead to the collapse of this institution, her affiliates and the less privileged citizens in rural areas will also be affected.

Financial statement is relationship is examined from its company’s financial information and is used for comparison purposes (Brigham & Ehrhardt, 2013). This information is also useful in interpreting and analyzing financial statements to financial analysis techniques among which is financial ratios and accounting ratios (Lermack, 2004). That is why it is paramount to assess the impact of financial statement analysis. This study therefore, emphasizes on the role of financial statement such as the balance sheet, income statements, and cash flow statements having improve the financial performance of enterprises.

1.4 RESEARCH QUESTIONS

1.4.1 Main Research Questions

• What is the effect of financial analysis statement on the financial performance of commercial banks in buea?

1.4.2 Specific research Questions

• What is the effect of income statement in the analysis of financial performance of commercial banks in buea?
• How can the balance sheet statement influence the analysis of financial performance of commercial banks in buea?
• Does the cash flow statement also have an influence in the financial performance of commercial banks in buea?

1.5 RESEARCH OBJECTIVES

The objectives will be divided into two that is the main and specific objectives.

1.5.1 1Main Research Objective.

• To examine the role of financial statement analysis in accessing the financial performance of commercial banks in buea

1.5.2 Specific Research Objective.

• To examine the impact of balance sheet statement in the analysis of financial performance of commercial banks in buea.
• To examine the impact of income in the analysis of financial performance of commercial banks in buea
• To examine the impact of cash flow statement in the analysis of financial performance in commercial banks in buea.

1.6 HYPOTHESIS OF THE STUDY

Ho₁: The balance sheet statement does not have influences the analysis of financial performance in     commercial banks in buea

Ho₂: The income statement does not have an impact in the analysis of financial performance in commercial banks in buea

Ho₃: The cash flow statement does not assist analysis of financial statement in assessing the financial performance of commercial banks in buea