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Analysis of Financial Statements
State the objectives of 'Analysis of Financial Statements'.
Objectives of Analysis Financial Statements:
The following are the various objectives for preparing financial statements.
It enables the conduct of meaningful comparisons of financial data. It provides better and easy understanding of the changes in the financial data overtime. It helps in designing effective plans and better execution of plans by enabling control and checks over the use of the financial resources.
Analysis of Financial Statements helps to know the earning capacity and profitability of a business firm. It also measures the efficiency of the business operations.
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From the following Balance Sheets of Sonam Ltd as on 31-3-2012 and 31-3-2011.
Prepare a Cash Flow Statements:
|
Liabilities |
31-3-2011 Rs |
31-3-2011 Rs |
Assets |
31-3-2011 Rs |
31-3-2011 Rs |
|
Equity Shares Capital Profit and Loss Account Bank Loan Proposed Dividend Provision for tax Creditors |
1,00,000
25,000
50,000 20,000
10,000 15,000
|
1,50,000
50,000
25,000 15,000
17,500 11,250 |
Patents Building Investment Debtors Stock Cash
|
12,500 1,50,000 - 50,000 2,500 5,000 |
11,250 1,50,000 18,750 3,750 21,250 |
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2,20,000 |
2,68,750 |
|
2,20,000 |
2,68,750 |
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Additional Information:
During the year a Building having book value Rs 50,000 was sold at a loss of Rs 2,000 and depreciation charged on Building was Rs 4,000.
What is meant by a 'Common Size Statement’?
Prepare a Comparative Income Statement from the following information.
2009 2010
Rs. Rs.
Sales 10,00,000 12,50,000
Cost of goods sold 5,00,000 6,50,000
Carriage inwards 30,000 50,000
Operating Expenses 50,000 60,0000
Income Tax 50% 50%
State the objectives of 'Analysis of Financial Statements'.
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