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Analysis of Financial Statements — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAnalysis of Financial Statements3 Marks
Question
List the techniques of Financial Statement Analysis.
✓

Answer

The following are the commonly used techniques of Financial Statement analysis:
  1. Comparative Financial Statements.
  2. Common Size Financial Statements.
  3. Trend Analysis.
  4. Ratio Analysis.
  5. Cash Flow Statement.
  6. Fund Flow Statement.
  7. The above listed techniques can be classified on the following basis:
A On the basis of Comparison.
Inter-firm Comparison.
  • Comparative Statement (Balance Sheet, Profit and Loss Account)
  • Common size Statement (of the same period)
  • Ratio of two or more Competitive Firms (of the same period)
  • Cash Flow Statement of two or more Competitive firms.
  • Polygon, Bar Diagram.
Intra-firm Comparison.
  • Comparative Statement (Balance Sheet, Profit and Loss Account)
  • Common size Statement (of the same period)
  • Ratio of two or more Competitive Firms (of the same period)
  • Cash Flow Statement of two or more Competitive firms
  • Polygon, Bar Diagram
Horizontal Comparison.

Vertical Comparison.
  1. On the basis of Time
Inter-period Comparison.
  • Comparative statement (two or more periods)
  • Cash Flow statement (two or more period) etc.
Cross Sectional (Intra-period) Comparison.
  • Common size statement
  • Ratio Analysis
  1. Horizontal Analysis.
  • Time series
  • Bar Diagram
  • Polygon
  • Comparative statement
  • Ratio Analysis
  1. Vertical Analysis.
  • Common size statement
  • Pie Diagram

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