FINANCIAL STATEMENT ANALYSIS AND DECISION MAKING OF COMERCIAL BANKS IN RWANDA CASE STUDY: BANK OF KIGALI PERIOD: 2021-2023

Abstract

This dissertation investigates the impact of financial statement analysis on decision-making within commercial banks in Rwanda, focusing specifically on the Bank of Kigali over the period 2021-2023. Given the crucial role of financial health in the banking sector, the study seeks to understand how financial analysis informs strategic decisions and operational effectiveness. The primary aim of this study is to evaluate the effectiveness of financial statement analysis in enhancing decision-making processes at the Bank of Kigali. Specific objectives include assessing the effectiveness of financial statement analysis at the Bank of Kigali, determining the relationship between financial statement analysis and decision-making, and identifying key financial indicators that influence decision-making processes. The research employs a quantitative methodology, utilizing secondary data sources such as financial statements, regulatory filings, and industry reports. The study population includes all commercial banks in Rwanda, with a particular focus on the Bank of Kigali. Analytical and descriptive research designs were adopted, with data analyzed using Microsoft Excel to identify patterns and relationships. Key findings showed significant growth in key performance indicators such as net income, return on equity (ROE), and return on assets (ROA) at the Bank of Kigali, indicating that financial statement analysis is crucial for effective decision-making. The correlation matrix revealed strong positive relationships among financial indicators, with net income showing high correlation with ROE (0.91) and return on assets (0.99), indicating that improvements in financial performance are closely linked with effective financial analysis. Regression analysis further confirmed that financial statement analysis significantly impacts decision-making, with key indicators such as the number of customers, number of assets, and net income growth strongly influenced by financial performance metrics. In conclusion, the study demonstrates that financial statement analysis plays a pivotal role in the decision-making processes at the Bank of Kigali, leading to enhanced financial performance and strategic growth.