Question
Describe the different types of financial analysis.
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Answer
Main three uses of financial analysis are as follows :
$1.$ For dividend decision : In the company form dividend decision is analysed by different parties like existing investors, potential investors and company itself. The payment of dividend is based on earning capacity of company which can be decided by profitability analysis and to take proper decision regarding dividend payment financial statement is useful.
$2.$ For lending decision: short term and long term loan and advances are provided to the business entities by banks and financial institutions. To know how far their advances are safe, financial statement analysis is useful.
$3.$ For borrowing decision: From the analysis of financial statements of their own, business entity can estimate its own borrowings capacity to borrow funds from the market. Based on this evaluation, opportunities for new investments can be explored.
$1.$ For dividend decision : In the company form dividend decision is analysed by different parties like existing investors, potential investors and company itself. The payment of dividend is based on earning capacity of company which can be decided by profitability analysis and to take proper decision regarding dividend payment financial statement is useful.
$2.$ For lending decision: short term and long term loan and advances are provided to the business entities by banks and financial institutions. To know how far their advances are safe, financial statement analysis is useful.
$3.$ For borrowing decision: From the analysis of financial statements of their own, business entity can estimate its own borrowings capacity to borrow funds from the market. Based on this evaluation, opportunities for new investments can be explored.
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On $1-8-2019$ Mehsana Limited issued $16,000, 8.5 \%$ debentures of $₹ 300$ each at discount of $5 \%$. All the debentures are to be redeemed after $6$ years as on $31-7-2025$ at a premium of $12 \%$. Write the journal entries in the books of the company for issue and redemption of debentures.
→Explain - Cash flow transactions of financing activities.
From the following information of ' F. L.' Ltd., calculate debt equity ratio.
→| Particulars | $(₹)$ | Particulars | $(₹)$ |
| Equity share capital | $10,00,000$ | Outstanding expenses | $1,00,000$ |
| General reserve | $6,00,000$ | Long-term loan | $2,00,000$ |
| Profit-loss A/c | $4,00,000$ | Long-term provisions | $2,00,000$ |
From the following information, prepare comparative statement of profit-loss :
What is meant by calls-in-advance? State the provisions of it under Companies Act.
Sharda, Jamna and Ganesh are partners of a partnership firm. On $1-4-18$ their capital respectively was $₹ 90,000, ₹ 60,000$ and $₹ 30,000 .$ During the year, the total drawings of partners were ₹ 30,000 , which was in the proportion of $2: 3: 5$. As per partnership deed :
$(1)$ Annually $6 \%$ interest is to be paid on opening capital.
$(2)$ On drawings $₹ 300 , ₹ 450$ and $₹ 750$ are to be charged for interest respectively.
$(3)$ Monthly salary of $₹ 2000$ for six months shall be paid to Sharda.
$(4)$ Half of the profit shall be shared amongst partners in equal proportion and half shall be in proportion of their opening capital.
After charging interest on drawings but before consideration of other adjustments, profit for the year ending on $31-3-19$ was $₹ 98,800$.
$25 \%$ amount of profit $($maximum of $₹ 16,000)$ to be transfered to development fund after consideration of above stated adjustments but before distribution of profit to the partners.
It was decided that closing capital of the firm shall be equal to opening capital after having incorporation of above stated adjustments and distribution of profit. This closing capital shall be in the proportion of $2: 1: 2$, for which necessary amount will be introduced by the partners or will be paid to the partners.
From the above information prepare profit and loss appropriation account for the year ending on $31-3-2019$ and partners capital accounts.
→$(1)$ Annually $6 \%$ interest is to be paid on opening capital.
$(2)$ On drawings $₹ 300 , ₹ 450$ and $₹ 750$ are to be charged for interest respectively.
$(3)$ Monthly salary of $₹ 2000$ for six months shall be paid to Sharda.
$(4)$ Half of the profit shall be shared amongst partners in equal proportion and half shall be in proportion of their opening capital.
After charging interest on drawings but before consideration of other adjustments, profit for the year ending on $31-3-19$ was $₹ 98,800$.
$25 \%$ amount of profit $($maximum of $₹ 16,000)$ to be transfered to development fund after consideration of above stated adjustments but before distribution of profit to the partners.
It was decided that closing capital of the firm shall be equal to opening capital after having incorporation of above stated adjustments and distribution of profit. This closing capital shall be in the proportion of $2: 1: 2$, for which necessary amount will be introduced by the partners or will be paid to the partners.
From the above information prepare profit and loss appropriation account for the year ending on $31-3-2019$ and partners capital accounts.
Following are the common size statement of profit and loss for the year ending on $31-3-2016$ and $31-3-2017$ of Shahnawaz Limited. Prepare complete common size statement by ascertaining balancing figures.
→| Common Size Statement of Profit and Loss for the Year Ending on $31-3-2016$ and $31-3-2017$ |
||||||
| Particulars | Note No. |
Amount (₹) | Percentag to sales | |||
| $31-3-2016$ $(₹)$ |
$31-3-2017$ $(₹)$ |
$31-3-2016$ $(\%)$ |
$31-3-2017$ $(\%)$ |
|||
| $(I)$ | Sales revenue | $9,00,000$ | $16,00,000$ | $100$ | $100$ | |
| $(II)$ | Other income | $?$ | $2,40,000$ | $10$ | $15$ | |
| $(III)$ | Total income $(I+ II )$ | $?$ | $18,40,000$ | $110$ | $115$ | |
| $(IV)$ | Expenses : | |||||
| $(i)$ Net purchase | $?$ | $11,20,000$ | $68$ | $70$ | ||
| $(ii)$ Changes in stock | $?$ | $(1,12,000)$ | $(05)$ | $(07)$ | ||
| $(iii)$ Depreciation | $?$ | $1,92,000$ | $7$ | $12$ | ||
| $(iv)$ Other expenses | $?$ | $1,60,000$ | $8$ | $10$ | ||
| Total expenses | $?$ | $13,60,000$ | $78$ | $85$ | ||
| $(V)$ | Profit before tax | $2,88,000$ | $?$ | $32$ | $30$ | |
| $(VI)$ | Less : Income tax $30\%$ | $86,400$ | $?$ | $9.6$ | $9$ | |
| $(VII)$ | Profit after tax | $2,01,600$ | $?$ | $22.4$ | $21$ | |
From the following transactions of Sweta Company Ltd. Calculate cash flow from operating activities :
→| Particulars | $(₹)$ |
| Profit before taxes | $1,32,000$ |
| Goodwill written of | $28,000$ |
| Patent amortized | $17,000$ |
| Depreciation written of | $29,000$ |
| Transfer to general reserve | $23,000$ |
| Interest received | $12,000$ |
| Dividend received | $9,000$ |
| Interest paid | $11,000$ |
| Dividend paid | $25,000$ |
| Profit on sale of investments | $13,000$ |
| Loss on sale of furniture | $18,000$ |
From the following given information calculate cash flow from investing activities:
| Particulars | Amount (₹) |
| Sale of non-current investments | 88,000 |
| Purchase of land | 1,48,000 |
| Purchase of machine | 98,000 |
| Sale of furniture | 45,000 |
| Dividend received on investments | 40,000 |
| Paid for goodwill | 32,000 |
| Issue of shares | 1,20,000 |
| Redemption of debentures | 45,000 |
| Loan borrowed | 28,000 |
Complete the comparative statement of balance sheets of Reshma Company Limited for the year ending on $31-3-2016$ and $31-3-2017.$
→| Particulars | Note No. $2$ |
$31-3-2016$ $(₹)$ $3$ |
$31-3-2017$ $(₹)$ $4$ |
Increase/ Decrease $(₹)$ $5(4-3)$ |
Increase/ Decrease (%) $6\left(\frac{5}{3} \times 100\right)$ |
|
| $(I)$ | Equity and Liabilities | |||||
| $(1)$ | Shareholders' funds : | |||||
| $(a)$ Share capital | ||||||
| $(i)$ Equity share capital | $?$ | $12,00,000$ | $?$ | $20$ | ||
| $(ii)$ Preference share Capital | $?$ | $10,50,000$ | $?$ | $50$ | ||
| $(b)$ Reserves and surplus | $?$ | $5,00,000$ | $?$ | $66.67$ | ||
| $(2)$ | Non-current liabilities | |||||
| $10\%$ debentures | $?$ | $4,50,000$ | $?$ | $12.5$ | ||
| $(3)$ | Current liabilities | $?$ | $2,00,000$ | $?$ | $33.33$ | |
| Total | $?$ | $34,00,000$ | $?$ | $33.33$ | ||
| $(II)$ | Assets : | |||||
| $(1)$ | Non-current assets : | |||||
| $(a)$ Fixed assets | ||||||
| $(i)$ Tangible assets | $12,00,000$ | $?$ | $?$ | $41.67$ | ||
| $(ii)$ Intangible assets | $11,00,000$ | $?$ | $?$ | $18.18$ | ||
| $(2)$ | Current assets | $2,50,000$ | $?$ | $?$ | $60$ | |
| Total | $25,50,000$ | $?$ | $?$ | $33.33$ | ||