What is the importance of comparative statements? Illustrate youranswer with particular reference to comparative income statement.
The following are the importance of Comparative Statements.
(i) Make Presentation Simpler : Comparative statements presents the financial
data in a simpler form. On the other hand, an year-wise data of the same items
are presented side-byside, which not only makes the presentation clear but also
enables easy comparisons (both intra-firm and inter-firm) conclusive.
(ii) Help in Drawing Conclusion: The presentation of comparative statement is so
effective that it helps the analyst to draw conclusion quickly and easily and that
too without any ambiguity.
(iii) Help in Forecasting :The management may analyse the trend and forecast
and draft various future plans and policy measures, with the help of comparative
statement:
(iv) Help in Detection of Problems :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. With the help of the
comparison of the financial data of two or more years, the financial management
can easily detect the problems.
Popular Questions of Class 12 Accountancy - Company Accounts and Analysis of Financial Statements
- Q:-
How will you disclose the following items in the Balance Sheet of a company;
(i) Loose tools
(ii) Uncalled liability on partly paid-up shares
(iii) Debentures redemption reserve
(iv) Mastheads and publishing titles (v) 10% debentures
(vi) Proposed dividend
(vii) Share forfeited account
(viii) Capital redemtion reserve
(ix) Mining rights
(x) Work-in-progress - Q:-
The current ratio provides a better measure of overall liquidity only when a
firm’s inventory cannot easily be converted into cash. If inventory is liquid, the
quick ratio is a preferred measure of overall liquidity. Explain. - Q:-
Explain the usefulness of trend percentages in interpretation of financial performance of a company.
- Q:-
The liquidity of a business firm is measured by its ability to satisfy itslong-
term obligations as they become due. What are the ratios used forthis purpose? - Q:-
What relationships will be established to study?
(a) Inventory Turnover (b) Debtor Turnover
(c) Payables Turnover (d) Working Capital Turnover - Q:-
What do you understand by analysis and interpretation of financial statements? Discuss its importance.
- Q:-
State the importance of financial statements to
(i) shareholders
(ii) creditors
(iii) government
(iv) investors - Q:-
What are liquidity ratios? Discuss the importance of current and liquid ratio.
- Q:-
What do you mean by Ratio Analysis?
- Q:-
Describe the different techniques of financial analysis and explain the limitations of financial analysis.
Recently Viewed Questions of Class 12 Accountancy - Company Accounts and Analysis of Financial Statements
- Q:-
How will you disclose the following items in the Balance Sheet of a company;
(i) Loose tools
(ii) Uncalled liability on partly paid-up shares
(iii) Debentures redemption reserve
(iv) Mastheads and publishing titles (v) 10% debentures
(vi) Proposed dividend
(vii) Share forfeited account
(viii) Capital redemtion reserve
(ix) Mining rights
(x) Work-in-progress - Q:-
Explain the limitations of financial statements.
- Q:-
How would you study the Solvency position of the firm?
- Q:-
State the importance of Financial Analysis?
- Q:-
State the meaning of financial statement analysis?
- Q:-
State the importance of financial statements to
(i) shareholders
(ii) creditors
(iii) government
(iv) investors - Q:-
The current ratio provides a better measure of overall liquidity only when a
firm’s inventory cannot easily be converted into cash. If inventory is liquid, the
quick ratio is a preferred measure of overall liquidity. Explain. - Q:-
‘Financial statements reflect a combination of recorded facts, accounting
conventions and personal judgements’ discuss. - Q:-
What do you understand by analysis and interpretation of financial statements? Discuss its importance.
- Q:-
The liquidity of a business firm is measured by its ability to satisfy itslong-
term obligations as they become due. What are the ratios used forthis purpose?
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