Extra Questions - Financial Statement Analysis | Crash Course of Accountancy - Class 12 - Commerce PDF Download

Q. 1. What is meant by Financial Statement Analysis? State any two limitations of it. {CBSE, All India Comptt. 2009}

Q. 2. State the various tools of Financial Statement Analysis.

Q. 3. Briefly explain any three limitations of Financial Statements Analysis. {CBSE, Delhi Comptt. 2010}

Q. 4. Briefly explain any three objectives of Financial Statements Analysis. {CBSE, All India Comptt. 2010}

Q. 5. What is meant by Analysis of Financial Statements? What is its importance to shareholders and employees? {CBSE, Delhi 2005 (III)}

Q. 6. What are the importance of Financial Analysis. {CBSE, Delhi 2009}

Q. 7. What is meant by Analysis of Financial Statements? How is it important from the viewpoint of creditors and management?

{CBSE, Delhi Comptt. 2005}

Q. 8. How is Analysis of Financial Statements important to Government Authorities? {CBSE, Delhi 2009 (III)}

Q. 9. Why is Analysis of Financial Statements important to Creditors? {CBSE. All India 2009 (I)}

Q. 10. Why is vertical Analysis of Financial Statements? {CBSE, All India 2009 (II)}

Q. 11. What is meant by Analysis of Financial Statements? How is it useful to investors and employees?

Explain in brief. (CBSE, All India Comptt. 2005 (I)}

Q. 12. How is the Analysis of Financial Statements useful to potential investors and Tax Authorities? Explain in brief. (CBSE, All India Comptt. 2005 (II)}

Q. 13. What is meant by Analysis of Financial Statements? Briefly explain horizontal analysis.

Q. 14. Distinguish between Horizontal Analysis and Vertical Analysis.

Q.15. How does 'subjectivity' become a limitation of Financial Statement Analysis? {CBSE, All India 2010 (III)} 
Ans. Subjectivity means using personal judgement in selecting the methods of accounting treatment. Since, subjectivity is inherent in personal judgement, analysis of such financial statements is not free from bias.

Q. 16. State the interest of tax authorities in the analysis of financial statements. {CBSE, All India 2011(I)}
Ans. Tax authorities are interested in knowing whether financial statements have been prepared in accordance with the legal provisions and whether the figures of production, sales and profits are correct to ensure proper assessment of tax liabilities.

Q. 17. State the interest of investors in the analysis of financial statements. {CBSE, All India 2011(11)}
Ans. Investors are interested in determining profitability of the company and safety of their investment. Financial analysis helps them in determining security of their investment and knowing profitability of the company in order to estimate expected dividend or rate of return on money invested.

Q. 18. State the significance of analysis of financial statements to Top Management' .{CBSE, All India 2012}
Ans. Financial statements analysis helps in measuring the success of company's operations, appraising the individual's performance and evaluating the system of internal control.

Q. 19. Explain how Financial Statements Analysis ignores qualitative elements. {CBSE, All India 2013 (III)}
Ans. Qualitative elements like quality of management, staff, public relations, etc. are ignored while carrying out the Analysis of Financial Statements.

Q. 20. Why are creditors interested in analysing Financial Statements? {CBSE, Foreign 2010)
Ans. Creditors are interested in knowing the firm's ability to meet its short-term liabilities, i.e. they want to assess financial position of the enterprise before giving loans or granting credit.