Question 3

List any three objectives of analysing financial statements?

Answer

1. Assessment of Past Performance and Current Position
2. Prediction of Net Income and Growth Prospects
3. Prediction of Bankruptcy and Failure

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 is the importance of comparative statements? Illustrate youranswer with particular reference to comparative income statement.
Q:-
What do you mean by Ratio Analysis?

Recently Viewed Questions of Class 12 Accountancy - Company Accounts and Analysis of Financial Statements

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