Statement Analysis Tools - Test Papers
CBSE Test Paper 01
Statement Analysis Tools
What financial statement lists assets from current to long term?
Statement of retained statement
Income statement
Cash flow statement
Balance sheet
Which of the following is the technique of financial statement analysis?
Trend analysis
Common‐size statement
All of these
Comparative statement
Which of these are limitation of Financial statements:
Measuring of solvency
Measuring of earning capacity or profitability
Measuring of financial strength
Static statements
The tool of Financial analysis is
Trend analysis
Credit decision
Vertical analysis
Horizontal analysis
The lenders provide loan capital to the ________.
None of these
Both of these
Company
Industry
Analyzing changes and trend in the ________ of previous years helps the management in forecasting and planning.
What are the Current Liabilities?
What is the meaning of Common Size Balance Sheet?
Give two objectives of Comparative Financial Statements.
With the help of the following information obtained from the books of Raj Silk Mills, prepare Comparative Statement of Profit and Loss for the year ended 31st March 2016:
Particulars 31st March 2016 31st March 2015 Revenue from Operations 300% of the Cost of Materials Consumed 200% of the Cost of Materials Consumed Expenses : Cost of Materials Consumed ₹ 12,00,000 ₹ 10,00,000 Other Expenses 20% of the Cost of Materials Consumed 10% of the Cost of Materials Consumed Tax 50% 50% Prepare Common-size Statement of Profit and Loss from the following information:
Particulars 31st March 2019 31st March 2018 Revenue from Operations ₹ 10,00,000 ₹ 7,50,000 Other Income ₹ 1,00,000 ₹ 75,000 Purchases of Stock-in-Trade ₹ 7,50,000 ₹ 6,00,000 Change in Inventories of Stock-in-Trade ₹ (50,000) ₹ 10,000 Other Expenses ₹ 10,000 ₹ 7,500 Rate of Income Tax 50% 50% Prepare a Comparative Statement of Profit & Loss of Ahmed Ltd., with the help of the following information:
31.3.2018 31.3.2017
Revenue from Operations₹
8,00,000₹
5,00,000Purchase of Stock in Trade 4,20,000 2,40,000 Changes in Inventories 80,000 60,000 Employee Benefit Expenses* 20,000 40,000 Other Expenses 40,000 30,000 Income Tax 50% 40% * Employee Benefit Expenses means expenses incurred on employees. It includes expenses such as salaries and wages, contribution to Provident Fund, staff welfare, etc.
Following are the Balance Sheets of Hind Ltd. for two consecutive years:
Hind Ltd.
BALANCE SHEETS
as at 31st March............. (Figures in thousand ₹)Particulars Note No. 31.3.2017 31.3.2016 I. EQUITY AND LIABILITIES: ₹ ₹ (1) Shareholder’s Funds: {a) Share Capital 3,300 2,800 (b) Reserves and Surplus 1,400 1,000 (2) Non-Current Liabilities: Long-term Borrowings 510 600 (3) Current Liabilities : (a) Short term Borrowings 860 600 (b) Trade Payables 430 250 6,500 5,250 II. ASSETS: (1) Non-Current Assets 3,630 2,130 (2) Current Assets (a) Inventory 1,100 1,500 (b) Trade Receivables 1,400 1,280 (c) Cash and Cash Equivalents 370 340 6,500 5,250 You are required to prepare a Comparative Balance Sheet and Comment upon the changes.
From the following balance sheets of HP Ltd. as at 31st March, 2019 prepare comparative balance sheet:
Particulars 31st March 2019 (Rs.) 31st March 2018 (Rs.) I. Equity and liabilities 1. Shareholders funds (a) Share capital: (i) Equity share capital 12,50,000 5,00,000 (ii) Preference share capital 2,50,000 2,50,000 (b) Reserves and surplus 3,00,000 4,50,000 2. Non-current liabilities Long-term borrowings 12% Debentures 9,50,000 5,50,000 Loan from directors 2,50,000 2,00,000 3. Current liabilities (a) Short-term borrowings 3,50,000 1,75,000 (b) Trade payables 2,00,000 1,00,000 (c) Short-term provisions 50,000 25,000 Total 36,00,000 22,50,000 II. Assets 1. Non-current assets Fixed assets: (Tangible) 22,50,000 15,00,000 2. Currents assets (a) Inventories 4,50,000 2,50,000 (b) Trade receivables 8,00,000 4,50,000 (b) Cash and cash equivalents 1,00,000 50,000 Total 36,00,000 22,50,000 What is the importance of comparative statements? Illustrate your answer with particular reference to comparative income statement.
CBSE Test Paper 01
Statement Analysis Tools
Solution
- (d) Balance sheet
Explanation: Balance sheet - (c) All of these
Explanation: All of these - (d) Static statements
Explanation: Static statements - (a) Trend analysis
Explanation: Trend analysis - (c) Company
Explanation: Company Financial data
Current Liabilities are liabilities which are expected to be settled within a year or operating cycle.
A common size balance sheet is a statement in which total of assets or equity & liabilities is assumed to be equal to 100 and all the figures are expressed as percentage of the total.
- To make the data simpler and more understandable:- The main aim of preparing comparative financial statements is to put the data for a number of years in simpler and comparable form.
- To indicate the trend:- Another aim of comparative financial statements is to indicate the trend of change by putting the figures of production, revenue from operations, expenses, and profits, etc. for a number of years side-by-side.
COMPARATIVE STATEMENT OF PROFIT AND LOSS
for the years ended 31st March 2015 and 2016Particulars Note No. 31st March 2015 31st March 2016 Absolute Change (Increase or Decrease) Percentage Change (Increase or Decrease) 1 2 3 4 5 A B (B-A = C) C/A 100 = D I. Revenue from Operations ₹
20,00,000₹
36,00,000₹
16,00,000%
80.00II. Less: Expenses (a) Cost of Materials Consumed 10,00,000 12,00,000 2,00,000 20.00 (b) Other Expenses 1,00,000 2,40,000 1,40,000 140.00 Total Expenses 11,00,000 14,40,000 3,40,000 30.91 III. Profit before Tax (I - II) 9,00,000 21,60,000 12,60,000 140.00 IV. Less: Tax 4,50,000 10,80,000 6,30,000 140.00 V. Profit after Tax (III-IV) 4,50,000 10,80,000 6,30,000 140.00 COMMON-SIZE STATEMENT OF PROFIT AND LOSS for the years ended 31st March 2018 and 2019
Particulars Note No. Absolute Amounts Percentage of Revenue from
Operations (Net Sales)31st March,
2018 (₹)31 st March,
2019 (₹)31st March,
2018 (%)31st March,
2019 (%)1. Revenue from Operations 7,50,000 10,00,000 100.00 100.00 II. Other Income 75,000 1,00,000 10.00 10.00 III. Total Revenue (I + II) 8,25,000 11,00,000 110.00 110.00 IV. Expenses (a) Purchases of Stock-in-Trade 6,00,000 7,50,000 80.00 75.00 (b) Change in Inventories of Stock-in-Trade 10,000 (50,000) 1.33 (5.00) (c) Other Expenses 7,500 10,000 1.00 1.00 Total Expenses 6,17,500 7,10,000 82.33 71.00 V. Profit before Tax (III - IV) 2,07,500 3,90,000 27.67 39.00 VI. Less: Income Tax 1,03,750 1,95,000 13.83 19.50 VII. Profit after Tax (V - VI) 1,03,750 1,95,000 13.84 19.50 Ahmed Ltd.
COMPARATIVE STATEMENT OF PROFIT & LOSS
for the years ended 31st March 2017 and 2018Particulars Note No. 2016-17 2017-18 Absolute Change (Increase or Decrease) Percentage Change (Increase or Decrease) 1 2 3 4 5 A B (B -A = C) C/A 100 = D ₹ ₹ ₹ % I. Revenue from Operations 5,00,000 8,00,000 3,00,000 60.00 II. Less: Expenses Purchase of Stock in Trade 2,40,000 4,20,000 1,80,000 75.00 Change in Inventories* 60,000 80,000 20,000 33.33 Employee Benefit Expenses 40,000 20,000 (20,000) (50.00) Other Expenses 30,000 40,000 10,000 33.33 Total Expenses 3,70,000 5,60,000 1,90,000 51.35 III. Profit before Tax (I - II) 1,30,000 2,40,000 1,10,000 84.62 IV. Less: Tax 52,000 1,20,000 68,000 130.77 V. Profit after Tax (III - IV) 78,000 1,20,000 42,000 53.85 *Changes in Inventories means Opening Stock less Closing Stock.
Hind Ltd.
COMPARATIVE BALANCE SHEET
as at 31st March 2016 and 2017 (Figures in thousand ₹)Particulars Note No. 31.3.2016 31.3.2017 Absolute Change (Increase or Decrease) Percentage Change (Increase or Decrease) 1 2 3 4 5 A B (B-A = C) C/A 100 = D I EQUITY AND LIABILITIES: ₹ ₹ ₹ % (1) Shareholder’s Funds: (a) Share Capital 2,800 3,300 500 17.86 (b) Reserves and Surplus 1,000 1,400 400 40.00 (2) Non-Current Liabilities : Long term Borrowings 600 510 (90) (15.00) (3) Current Liabilities (a) Short term Borrowings 600 860 260 43.33 (b) Trade Payables 250 430 180 72.00 TOTAL 5,250 6,500 1,250 23.81 II. ASSETS (1) Non-Current Assets 2,130 3,630 1,500 70.42 (2) Current Assets: (a) Inventory 1,500 1,100 (400) (26.67) (b) Trade Receivables 1,280 1,400 120 9.38 (c) Cash and Cash Equivalents 340 370 30 8.82 TOTAL 5,250 6,500 1,250 23.81 Comparative Balance Sheet
Particulars 31.03.2018 31.03.2019 Absolute change %age change (A) (B) (C) = (B-A) (D) = (C/A) x 100 Rs. Rs. Rs. % I. Equity and liabilities 1. Shareholders funds: (a) Share capital: Equity share capital 500000 1250000 750000 150% Preference share capital 250000 250000 ..... ..... (b) Reserves and surplus 450000 300000 (150000) (33.33%) 2. Non-current liabilities: (a) Long-term borrowings: 12% Debentures 550000 950000 400000 72.73% Loan from directors 200000 250000 50000 25% 3. Current liabilities 300000 600000 300000 100% 2250000 3600000 1350000 60% II. Assets 1. Non-current assets: (a) Fixed assets: Tangible assets 1500000 2250000 750000 50% 2. Currents assets: (a) Inventories 250000 450000 200000 80% (b) Trade receivables 450000 800000 350000 77.77% (b) Cash and cash equivalents 50000 100000 50000 100% 2250000 3600000 1350000 60% The following are the importance of Comparative Statements.
- Easy to Forecast: The Comparative analysis of profitability and operational efficiency of a business over a period of time helps in analysing the trend and also assists the management to forecast and draft various future plans and policy measures accordingly.
- Easy for Drawing Conclusion: The presentation of comparative statement is so effective that it enables the analyst to draw conclusion quickly and easily and that too without any ambiguity.
- Easy Detection of Problems: By comparing the financial data of two or more years, the financial management can easily detect the problems. While comparing the data, some items may have increased while others have decreased or remained constant. The comparative analysis not only enables the management in locating the problems but also helps them to put various budgetary controls and corrective measures to check whether the current performance is aligned with that of the planned targets.
- Simple Presentaion: The Comparative Statements present the financial data in a simpler form. Moreover, the year-wise data of the same items are presented side-by-side, which not only makes the presentation clear but also enables easy comparisons (both intra-firm and inter-firm) conclusive.