CBSE Class 12 Accountancy Financial Statement Analysis Assignment

LEARNING OBJECTIVES:

After studying the lesson, students will be able to:

¶ Understand the meaning of financial statements and their objectives.

¶ Identify the parties interested in the financial statements.

¶ Understand the meaning of financial analysis and its objectives

¶ Understand the parties interested in financial Analysis

¶ Analyse the limitation of financial analysis

¶ Prepare comparative Income statement and Position Statement.

¶ Prepare Common Size Statements

¶ Understand the tools of Financial Analysis.

SALIENT POINTS:-

• Analysis of Financial statement is the systematic process of identifying the financial strength and weaknesses of the firm by establishing the relationship between the items of the Balance Sheet and income statement.

• The information available from the Analysis, serves the interest of different sections like Management, shareholders, workers, creditors, government, Potential Investors, Economist and Researchers and Stock Exchange.

• Financial analysis can be External Analysis and Internal Analysis, Horizontal analysis and Vertical Analysis.

• External Analysis: when analysis is made on the basis of Published statements, reports and information then this is known as External analysis.

• Internal Analysis: This analysis is based upon the information available to the business only.

• Horizontal Analysis: This analysis is based on the financial statements of different years of the same business unit or financial statements of a particular year of different business units.

• Vertical Analysis: According to this analysis financial statement of the same period or different items of the same financial statements are compared.

• Comparative statements, Common Size statements, Trend Analysis, Ratio Analysis, Fund Flow Statement, Cash flow statement are the Tools of financial statement analysis.

• Comparative Statements: it helps in ascertaining change in the items of income statement and Position Statement of different years in terms of figures and percentage.
 

Question. Which of the following is device of comparative statements?
(a) Comparison expressed in terms of absolute data
(b) Comparison expressed in terms of percentages
(c) Comparison expressed in terms of ratios
(d) All of the Above

Answer: D

Question. Financial Statement Analysis Objectives/Need is
(a) All of the options
(b) Measure the profitability of the business
(c) Measure the financial strength of the business
(d) Make comparative study within the firm and with other forms

Answer: A

Question. Financial analysis become useless because it:
(a) Measures the profitability
(b) Measures the Solvency
(c) Lacks Qualitative Analysis
(d) Makes a comparative study

Answer: C

Question. In the Statement of Profit & Loss of a Common Size Statement:
(a) Figure of net revenue from operations is assumed to be equal to 100
(b) Figure of gross profit is assumed to be equal to 100
(c) Figure of net profit is assumed to be equal to 100
(d) Figure of assets is assumed to be equal to 100

Answer: A

Question. Interest on Loans is
(a) Direct Expenses
(b) Indirect Expenses
(c) Operating Expenses
(d) None of the Above

Answer: B

Question. Importance of Comparative Statement is
(a) All of the options
(b) Make the data simple and more understandable
(c) Indicate the trend with respect to the previous year
(d) compare the firm performance with the performance of other firm in the same business

Answer: A

Question. In which analysis Financial Statement for a single year analysed
(a) Dynamic Analyses
(b) Vertical Analysis and Dynamic Analyses
(c) Vertical Analysis
(d) None of the options

Answer: C

Question. An equation in which total assets are multiplied to profit margin is classified as
(a) Du DuPont equation
(b) Turnover equation
(c) Preference equation
(d) None of the options

Answer: A

Question. Operating Expenses is include
(a) All of the options
(b) Office and Administrative expenses
(c) Selling and Distribution expenses
(d) Provision for doubtful debts

Answer: A

Question. Rent received, Profit on sale of fixed assets, Compensation for acquisition of land are example of
(a) Operating Incomes
(b) Non-operating Incomes
(c) Operating expenses
(d) None of the options

Answer: B

Question. Main limitation of analysis of financial statements is
(a) Affected by window dressing
(b) Difficulty in forecasting
(c) Do not reflect changes in price level
(d) All of the Above

Answer: D

Question. In a common-size Balance Sheet, total equity and liabilities are assumed to be equal to :
(a) 1,000
(b) 100
(c) 10
(d) 1

Answer: B

Question. each item is expressed as a percentage of some common base in
(a) Common size statement
(b) Fund Flow Statement
(c) Cash Flow Statement
(d) Cash Flow Statement

Answer: A

Question. Comparative Financial Statements show:
(a) Financial position of a concern
(b) Earning capacity of a concern
(c) Both of them
(d) None of these

Answer: C

Question. Comparative statement are also known as
(a) Horizontal analysis
(b) Dynamic analysis
(c) Vertical analysis
(d) External analysis

Answer: A

Question. Importance of Comparative Statements
(a) Make Presentation Simpler
(b) All of the options
(c) Help in Drawing Conclusion
(d) Help in Detection of Problems

Answer: B

Question. For a healthy business the current ratio lies between
(a) 0 to 1.5
(b) 3 to 4.5
(c) 4.5 to 6
(d) 1.5 to 3

Answer: D

Question. What will be the trend percentage, if the Inventory of a firm is Rs.2,00,000; Rs.2,40,000; Rs.3,00,000 and Rs.4,00,000 respectively?
(a) 1, 1.2, 1.5,2
(b) 10, 12, 15,20
(c) 100, 120, 150, 200
(d) None of the Above

Answer: C

Question. The analysis of financial statement by a shareholder is an example of:
(a) External Analysis
(b) Internal Analysis
(c) Vertical Analysis
(d) Horizontal Analysis

Answer: A

Question. Feature of financial analysis is to present the data contained in financial statements in
(a) Easy form
(b) Convenient and rational groups
(c) Comparable form
(d) All of the Above

Answer: D

Question. Which of the following is not a limitation of Financial Statement Analysis?
(a) Ignores the Qualitative Elements
(b) Not free from personal bias
(c) Intra-firm Comparison
(d) Ignores the price level changes

Answer: C

Question. An Annual Report is issued by a company to its:
(a) Management
(b) Directors
(c) Auditors
(d) Management

Answer: A

Question. Which of the following is untrue :
(a) Common size Balance Sheet
(b) Common size Statement of Profit & Loss
(c) Common size cash Flow Statement
(d) None of the Above

Answer: C

Question. Common size analysis is also known as ______ Analysis
(a) Vertical
(b) Vertical
(c) Vertical
(d) None of the options

Answer: A

Question. Which objective is not fulfilled by comparative financial statement:
(a) Indicate the extent of change in assets and liabilities
(b) Indicate the extent of change in items of Statement of Pofit & Loss
(c) Show effect of operative activities on assets and liabilities
(d) Show the direction of change in assets and liabilities

Answer: B
 

Please refer to attached file for CBSE Class 12 Accountancy Financial Statement Analysis Assignment