State the objectives of 'Analysis of Financial Statements'.

Solution

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.

Some More Questions From Analysis of Financial Statements Chapter

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
63,750

3,750

21,250

2,20,000

2,68,750

2,20,000

2,68,750

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%

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 63,750 3,750 21,250

	2,20,000	2,68,750		2,20,000	2,68,750

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Analysis Of Financial Statements

State the objectives of 'Analysis of Financial Statements'.

Some More Questions From Analysis of Financial Statements Chapter

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%