THE ROLE OF FINANCIAL STATEMENT ANALYSIS ON THE PERFORMANCE OF PUBLIC COMPANIES IN RWANDA CASE STUDY OF ENERGY WATER AND SANITATION AUTHORITY {EWSA)

TABLE OF CONTENTS

DECLARATION .......... ... ................................................................................... .................................. i

APPROVAL. .................................................................. ...... ....... ..... ................................................. ii

DEDICATION ....... ............................................................................................ ............................. .... iii

ACKNOWLEDGMENTS ....... ......... ...... ................................ ............. ....... ............................................ iv

LIST OF ABREVIATIONS ........... ..................................... .... ............................ ................................. v

TABLE OF CONTENTS ..................................................................................................... ............... vi

CHAPTER ONE: INTRODUCTION ..................................................... .. .. ........... ................................ 1

1.1 BACKGROUND OF THE STUDY .................................................................................................. !

1.2 STATEMENT OF THE PROBLEM ...... .............................. .... .... ... .................................................. 3

1.3 SCOPE OF THE STUDY .............................................................................................................. 4

1.4 OBJECTIVE OF THE RESEARCH ............................................................................... ......... ........ 4

1. 4.1 General objective ................................................................................................................... 4

1.4. 2 Specific objectives .................................................... ... ........... .... .... ...... ......... ..... ... .... ......... .... 4

1.4.3 Research questions ... ........................................ ......... ............. ... ... .......................................... S

1.4.4 SIGNIFICANCE OF THE STUDY .............................................................................................. 5

CHAPTER TWO: LITERATURE REVIEW ........................................................................................... 6

2.0 FINANCIAL ACCOUNTING ........................................ .............. .. ................................................ 6

2.1 FINANCIAL STATEMENTS ....................................... ........................................ ......... ................. 6

2.1 .1 IMPORTANCE OF FINANCIAL STATEMENTS ............................................. ............................. 6

2.2 CONCEPTUAL FRAMEWORK ................................................................................................ ... .. 7

2.3 RELATED LITERATURE ............... .. ............. ... .... ............ ................. .... ....................................... 8

2.3.1 TYPES OF FINANCIAL STATEMENTS ........................................................................ ... ... ...... . 8

2.3.2 INCOME STATEMENT. .................................................................................................. ......... 8

2.3.3 BALANCE SHEET .. ... ............ ................ ....... .... ...... .... ...... ... ............................................... 9

2.3.4 STATEMENT OF RETAINED OF EANINGS ................................ ............................................ 10

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2.3.5 CASH FLOW STATEMENT ..................................................................................................... 10

2.4 USERS OF FINANCIAL STATEMENT ........... ............................................................................. 11

2.4.0 SHAREHOLDERS/ OWNERS ...................... .......................... .. ............................................... 11

2.4.1 MANAGEMENT ....... ............................................................................................................... 12

2.4.2 EMPLOYEES ....................... .......................................................... ....................... ................. 12

2.4.3 TRADE CREDITORS .............................................................................. ......... ..................... .. 12

2.4.4 GOVERNMENT ........................... ... ....... ............ .. ................................................................... 13

2.4.5 SUPPLIERS ........................................................................................................................... 13

2.4.6 TRADE UNIONS .................................................................................................................... 13

2.4.7 INVESTORS ....................................................................................................... ... .............. ... 13

2.4.8 THE PUBLIC.................................................................................................................... 13

2.4.9 CUSTOMERS........................ .... .............................................................................. ........ .. 14

2. 5 FINANCIAL ANALYSIS............................................................................................................ 14

2.5.1 OBJECTIVES OF FINANCIAL STATEMENT

ANALYSIS ...................................................................................................................................... 14

2.5.2 STEPS INVOLVED IN FINANCIAL STATEMENT ANALYSIS ................................................. 15

2.5 .3 TYPES OF FINANCIAL STATEMENT.................................................................................... 16

2.6 TECHNIQUES OR TOOLS OF FINANCIAL ;\NAL YSIS ............................................................ .. 17

2.6.1 TYPES OF RATIOS ..... ......................................................................................................... 20

2.6.2 IMPORTANCES OF RATIOS ANALYSIS ................................................................................ 29

2.6.3 LIMITATIONS OF RATIO ANALYSIS .................................................................................... 30

2.6.4 LIMITATIONS OF FINANCIAL ANALYSIS ............................................................................ 31

CHAPTER THREE: RESEARCH METHODOLOGY ........................................... .. ............... ........ ....... 34

3.0 RESEARCH DESIGN .............................................................................................................. .. 34

3.1 POPULATION OF THE STUDY ......................... ................. .... ..................... .. ........... ................ 34

3.1.1 Sample section technique .................................................................................................... 34

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3.1.2 Sample size ............ .. ........... ..................... ............................................................................ 34

3.2 SOURCE OF DATA COLLECTION ............................................................................................ 35

3.2.1 Primary data ......................................................................................................................... 35

3.2.2 Secondary data ..................... ............................................................................................... 35

3.3 TECHNIQUES OF DATA COLLECTION .............. ...... .......................... ...................................... 35

3.3.1 Questionnaire ........................................................................ ................... ....... ...... ............ ... 35

3.4 data processing .................. ...... .. .......... .... ................. ........................................................... ... 36

3.4.1 Editing ............ .................. ... ......... ........ .. ... ............................................................... .. .......... 36

3.4.2 Coding .............................................................................................. : ................................... 36

3.4.3 Tabulation ........................ ......................................................................................... ............ 36

3.5 DATA ANALYSIS ......................................... ............ ....... ........... .. ................. ....... .... ................. 36

3.6 LIMITATIONS OF THE STUDY ................ ... .. ........................................ .......... .............. ..... ...... 37

CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION ........ ............ .... ..... ........................ ..... 38

COMMON SIZE BALANCE SHEET. .. .. .................... .. ..... ........... ...................... .. ............................... 39

RATIO ANALYSIS ......................... ................................................ ......................................... .. ....... 40

PROFITABILITY ANALYSIS ........................... ................. ................................................................. 41

CASH RATIO ........ ................................ ............................ .. ............................................................ 44

QUICKY RATIO ...... ......... ... ............................... · .................... ................. .. ..... ................................. 44

ANALYSIS ON ACTIVITY RATIOS.. ........................ ..................................................................... 45

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ............ 47

5.0 SUMMARY OF FINDINGS ..... .. ........................ ...... .. .............................. .. .. ................. ..... .. ...... .. 47

5.1 CONCLUSION OF THE STUDY ...... .................. .. ........................................................ .......... .... 48

5.2 RECOMMENDATIONS OF THE STUDY ........................ ..... ........ ... .............. ...... .............. ... ....... 48

5.3 COMPANY PROFILE .............................................................. ........... ... ........ .. .. ............ ... ......... . 49

5.3.1 INTRODUCTION ....................... ..... ....... .. .. ...................... .... ........................................... ....... 49

5.3.2 VISION ................................................................................................... ... ........ ................... 49

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5.3.3 MISSION OF EWSA ....................................................................................................... .... ... 49

5.3.4 OBJEmVES OF EWSA. ... ............................................ ............................ ........... ........... ....... 49

REFERENCES ............ .............................................................................. ............. ........................... 51

APPENDICES .... ......... ..................................................................................................................... 53

APPENDIX: A ........................................................................................ .......................... ............... 54

Appendix B .................................................................................................................................... 60

Appendix C ....... ......................... .................................................................................................... 61