Analysis of Financial Statements

  • Question 1
    CBSEENAC12000050

    State any one limitation of 'Analysis of Financial Statements'.

    Solution

    Analysis of Financial Statements suffers from certain limitations and they are:
    a) It is only a study of interim report.
    b) It ignores non-monetary factors. 

    Question 2
    CBSEENAC12000052

    From the following 'Statement of Profit & Loss' for the year ended 31st March, 2013, prepare a 'Comparative Statement of Profit & Loss' of Good Service Ltd. 

    Particulars

    Note No.

    2012-2013
    Rs

    2011-2012
    Rs

    Revenue from operations
    Other Incomes
    Expenses

     

    20,00,000
    10,00,000
    21,00,000

    15,00,000
    4,00,000
    15,00,000

     Rate of income tax was 50%.

    Solution
    Question 3
    CBSEENAC12000077

    State any one objective of Financial Statement Analysis.

    Solution

    The most important objective of Financial Statement Analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the business. It provides better and easy understanding of the changes in the financial data over a period of time.

    Question 4
    CBSEENAC12000096

    State the significance of Analysis of Financial Statements to the Lenders.

    Solution

    Analysis of financial statements helps the lenders in assessing the long-term solvency of the business. It also helps them in evaluating the relative financial status of a firm in comparison to other competitive firms.

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