A. S.

Patil College of Commerce (Autonomous), Bijapur

B.Com Programme Analysis of Financial Statements
VI Semester

Question Bank Unit II:

Analysis of Financial Statements A) Short questions of two marks 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) B) Give two reasons for analysis of financial statements What is meant by financial analysis? Write meaning of financial interpretation What are the steps in analyzing financial statements? Define financial analysis Why do you analyse financial statements? Define interpretation of financial analysis Mention two objectives of financial analysis Write two distinctions between analysis & interpretation Briefly explain any two uses of financial analysis How do you classify financial analysis? What is modus aperandi method of classification of financial analysis ? What is internal analysis of financial statements ? What is external analysis of financial statements ? What is vertical analysis of financial statements ? What is horizontal analysis of financial statements? What are the tools of financial analysis? What is meant by common-size statement? What is meant by comparative statement? What is trend percentages? Write two advantages of trend analysis

Question of five marks each 1) Give the meaning and definition of financial analysis. Write its objectives 2) Define & distinguish between analysis & interpretation of financial analysis 3) Explain briefly the uses of financial analysis 4) Decisions taken on the basis of financial 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 statements ? State the procedure of computing them. 8) Write an analytical note on comparative income statement & state the procedure of computing them 9) Write an analytical note on common-size statements & state the procedure of computing it. 10) Briefly analyse the importance of Trend Analysis as a tool of financial analysis & interpretation. State the procedure of computing it.

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The profit & loss A/c of company is given below: Profit & Loss Account 2005 2006 7,50,000 By net sales By Incomes Administrative Exp Selling Exp Non-operating Exp 30,000 40,000 30,000 1,50,00 0 8,50,00 0 11,00,00 0 11,50,00 0 13,70,00 0 40,000 50,000 40,000 2,20,000 non-operating 2005 8,00,000 50,000 2006 10,00,000 1,00,000

Cost of goods sold To operating Exp

6,00,000

To Net profit

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. Profit & Loss a/c for the year ending 31st of March 2005 Rs. To cost of goods sold To operating Exp Administrative Exp Selling Exp To net profit 20,000 30,000 1,50,000 7,00,000 20,000 40,000 2,00,000 9,00,000 7,00,000 9,00,000 5,00,000 2006 Rs. 6,40,000 By Sales 2005 Rs. 7,00,000 2006 Rs. 9,00,000

Balance sheet as on 31 March 2005 Eq. capital Pref. Capital Reserves Debentures Bills payable Sundry Creditors 2,50,000 3,00,000 2,00,000 1,00,000 1,50,000 1,50,000 11,50,000 2006 2,50,000 3,00,000 2,50,000 1,50,000 2,20,000 2,00,000 13,70,000 Cash Debtors Stock Land Building Plant 2005 50,000 3,00,000 1,00,000 1,00,000 2,50,000 3,50,000 11,50,000 2006 70,000 4,50,000 2,00,000 1,20,000 2,25,000 3,05,000 13,70,000

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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 To opening stock To purchases To Gross profit Amount 5,00,000 14,00,000 7,00,000 26,00,000 To Administrative Expenses To Selling & Distribution Exp To Net profit 2,25,000 80,000 3,85,000 7,25,000 Balance Sheet as at 31st December, 2007 Liability Equity Capital Pref. Capital Reserves Bills payable Over drafts Creditors Amount 10,00,000 5,00,000 1,00,000 2,50,000 5,00,000 4,00,000 27,50,000 Goodwill Machinery Land and Building Stock Debtors Bank Assets Amount 5,00,000 6,00,000 7,00,000 6,00,000 2,00,000 1,50,000 27,50,000 7,25,000 By Gross profit b/d By profit on sale of furniture 26,00,000 7,00,000 6,00,000 By sales By Closing stock Particulars Amount 20,00,000 6,00,000

Hints: The problem is to be solved under common size Income Statement & Common size balance sheet.