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DK Goel Solutions: Tools for Financial Analysis- Comparative Statements - Commerce PDF Download

Q1: Following is the balance sheet of X Ltd. as on 31st March 2019 and 2018.

DK Goel Solutions: Tools for Financial Analysis- Comparative Statements - Commerce

Ans: Comparative Balance Sheet of X LTD.
As at 31st March 2018 and 2019
DK Goel Solutions: Tools for Financial Analysis- Comparative Statements - Commerce


Q2: What is a Comparative Statement of P&L?
Ans: 
A Comparative Statement of P&L depicts the figures of revenue from operations, expenses, incomes and net profit or loss for a number of years so that the changes in absolute data in terms of money as well as in terms of percentages may be known.

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FAQs on DK Goel Solutions: Tools for Financial Analysis- Comparative Statements - Commerce

1. What are comparative financial statements and why are they important?
Ans. Comparative financial statements are financial reports that present the financial performance and position of a company over multiple periods. They are important because they allow stakeholders to analyze trends, measure performance against previous years, and make informed decisions regarding investments, budgeting, and resource allocation.
2. How do you prepare comparative statements for financial analysis?
Ans. To prepare comparative statements, you need to gather financial data for the periods you want to compare. Then, create a side-by-side layout of key financial metrics, such as revenues, expenses, and net income. Ensure that each line item is consistent across periods, and calculate the percentage change to highlight growth or decline.
3. What key components should be included in comparative financial statements?
Ans. Key components of comparative financial statements include the income statement, balance sheet, and cash flow statement. Each component should display figures for at least two periods, allowing for easy comparison of revenues, expenses, assets, liabilities, and cash flows.
4. How can comparative financial statements aid in decision-making for businesses?
Ans. Comparative financial statements help businesses identify trends in financial performance, assess the effectiveness of strategies, and benchmark against industry standards. They enable management to make data-driven decisions regarding cost control, investment opportunities, and strategic planning.
5. What are the limitations of using comparative financial statements for financial analysis?
Ans. Limitations of comparative financial statements include the potential for misleading conclusions if external factors are not considered, such as economic changes or industry trends. Additionally, historical data may not accurately predict future performance, and differences in accounting policies can affect comparability between periods.
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