Financial Statement Analysis and Investment Decision Making in Commercial Banks: A Case of Bank of Kigali, Rwanda

Abstract

This research analyzed the contribution of financial statements in investment decision making of banks in Rwanda taking the case of bank of Kigali. The study ascertained benefits of financial statements analysis; it analyzed obstacles of investment decisions faced by Bank of Kigali; and it established the correlation of investment decisions and financial statements analysis of Bank of Kigali. This study is significant to different beneficiaries, such as researcher, other researchers and National Bank of Rwanda. Both a descriptive and a correlational research design were adopted and quantitative and qualitative methods were used 0.126 managers were targeted and 96 managers were sampled and a stratified random sampling technique was utilized in bank of Kigali. Data from the field was collected using questionnaire and a documentary analysis where financial reports of the bank from 2014 to 2018 were analyzed. This research used correlation analysis and SPSS version 22.0 for analysis. The finding revealed that holding independent variables constant to a constant zero, short term investment decision would be at 0.266 for common size analysis while the most significant p-value was 0.008. The finding revealed that holding independent variables constant to a constant zero, Vertical analysis would be at 0.215 for horizontal analysis and element enhanced ratio analysis in the term investment decision limited by a factor of 0.001 correlated with the long term investment decision. It is concluded that understanding financial statement analysis provides that is very important to those who have the businesses as tools for reducing the considerable risks involved in starting and growing the business. Financial status of Bank of Kigali need to be maintained through the enhancement of good flow of deposits, savings and repayment arrangements to enable it serve its members while enhancing quality decisions for better service provision and also there is a need to invest in business, technology, product development, training and effective risk management systems that may be facilitated by bold decisions for the life of the company. It is also recommended to always mitigate risks while enhancing innovations and development.