A. S. Patil College of Commerce (Autonomous), (Autonomous), Bijapur B.Com Programme
Analysis of Financial Statements VI Semester
Question Bank
Unit II: Analysis of Financial Statements A)
B)
Short questions of two marks 1)
Give two reasons for analysis of financial statements
2)
What is meant by financial analysis?
3)
Write meaning of financial interpretation
4)
What are the steps in analyzing financial statements?
5)
Define financial analysis
6)
Why do you analyse financial statements?
7)
Define interpretation of financial analysis
8)
Mention two objectives of financial analysis
9)
Write two distinctions between analysis & interpretation
10)
Briefly explain any two uses of financial analysis
11)
How do you classify financial analysis?
12)
What is modus aperandi method of classification of financial analysis ?
13)
What is internal analysis of financial statements ?
14)
What is external analysis of financial statements ?
15)
What is vertical analysis of financial statements ?
16)
What is horizontal analysis of financial statements?
17)
What are the tools of financial analysis?
18)
What is meant by common-size statement?
19)
What is meant by comparative statement?
20)
What is trend percentages?
21)
Write two advantages of trend analysis
Question of five marks each 1) Give the meaning and and definition of financial analysis. analysis. Write its objectives 2) Define & distinguish between analysis & interpretation of financial analysis 3) Explain briefly the uses of of financial financial analysis analysis 4) “Decisions taken on the basis of financial statements statements may not be regarded as final & accurate” – comment 5) What are the classifications of different types of financial analysis 6) What are the tools & techniques of financial analysis ? Write any one of them in detail ? 7) What is meant by comparative comparative statements ? State the procedure of of computing them. 8) Write an analytical analytical note on comparative comparative income statement statement & state the procedure procedure of computing computing them 9) Write an analytical analytical note on common-size statements statements & state the procedure of of computing it. 10) Briefly analyse the importance of “Trend Analysis” as a tool of financial analysis & interpretation. State the procedure of computing it.
11)
The profit & loss A/c of company is given below:
Profit & Loss Account 2005 Cost of goods sold
2006
6,00,000
2005
7,50,000
To operating Exp
By net sales By
2006
8,00,000
10,00,000
50,000
1,00,000
non-operating
Incomes Administrative Exp
30,000
40,000
Selling Exp
40,000
50,000
Non-operating Exp
30,000
40,000
1,50,00
2,20,000
To Net profit
0 8,50,00
11,00,00
11,50,00
13,70,00
0
0
0
0
You are required to prepare a common-size Income Statement and interpret the changes. (Bangalore University, B.Com Exam) C) Questions of 15 marks each : 1) Write the meaning, definition, uses & objectives of financial analysis. 2) What is analysis & interpretation of financial statements? Write & explain the types of financial analysis 3) Define analysis & interpretation of financial statements. What are their distinctions? write objectives of financial analysis 4) What is meant by financial analysis & interpretation? Briefly explain the tools & techniques of financial analysis. 5) Write an analytical note on comparative statements & common size statements as a tool of financial analysis. Briefly explain the procedure of calculating them. 6) What are the trend ratios & explain the technique of computing trend ratios. In what manner of does it help in understating balance sheet ? 7) From the following profit & loss a/c and balance sheet of Gayatri Projects Ltd. prepare a comparative Income Statement & Comparative Balance Sheet. st
Profit & Loss a/c for the year ending 31 of March 2005
2006
2005
2006
Rs.
Rs.
Rs.
Rs.
5,00,000
6,40,000
Administrative Exp
20,000
20,000
Selling Exp
30,000
40,000
1,50,000
2,00,000
7,00,000
9,00,000
To cost of goods sold
By Sales
7,00,000
9,00,000
7,00,000
9,00,000
To operating Exp
To net profit
st
Balance sheet as on 31 March 2005
2006
2005
Eq. capital
2,50,000
2,50,000
Cash
Pref. Capital
3,00,000
3,00,000
Reserves
2,00,000
Debentures
2006
50,000
70,000
Debtors
3,00,000
4,50,000
2,50,000
Stock
1,00,000
2,00,000
1,00,000
1,50,000
Land
1,00,000
1,20,000
Bills payable
1,50,000
2,20,000
Building
2,50,000
2,25,000
Sundry Creditors
1,50,000
2,00,000
Plant
3,50,000
3,05,000
11,50,000
13,70,000
11,50,000
13,70,000
8) Write the meaning & importance common size statements & trend percentage as tool of financial analysis. Also write their procedure of calculation
D)
Case Study : ii) Following is the profit & loss a/c and Balance sheet of ABB Ltd., you are required to redraft them for the purpose of financial analysis to guide the management: Particulars
Amount
To opening stock
Particulars
5,00,000
To purchases
By sales
14,00,000
To Gross profit
By Closing stock
20,00,000 6,00,000
7,00,000 26,00,000
To Administrative Expenses
2,25,000
To Selling & Distribution Exp
80,000
To Net profit
Amount
26,00,000 By Gross profit b/d
7,00,000
By profit on sale of furniture
6,00,000
3,85,000 7,25,000
7,25,000 st
Balance Sheet as at 31 December, 2007 Liability Equity Capital
Amount 10,00,000
Assets
Amount
Goodwill
5,00,000
Pref. Capital
5,00,000
Machinery
6,00,000
Reserves
1,00,000
Land and Building
7,00,000
Bills payable
2,50,000
Stock
6,00,000
Over drafts
5,00,000
Debtors
2,00,000
Creditors
4,00,000
Bank
1,50,000
27,50,000
27,50,000
Hints: The problem is to be solved under common size Income Statement & Common –size balance sheet.
