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Question
Briefly explain the significance of 'Analysis of financial statements' to (a) The Finance Manager, and (b) Trade Payables.
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Solution
(a) The Finance Manager: Financial analysis enables the company to understand its financial position and financial vitality. It helps in knowing the earning capacity, profitability, solvency, stability and credit worthiness of the company. The finance manager is involved in making different financing policies and determining the actual performance of the company. With the help of the financial analysis, the finance manager take decisions whether to continue the existing policies, how to enhance efficiency of business operations, etc.
(b) Trade Payables: With the help of the financial analysis, creditors can judge the ability of the business to discharge its all liabilities. Creditors are basically interested in knowing the credit worthiness and liquidity position of a business. Financial analysis helps the creditors to know the firm's capability to pay-off its debts over a period of time.
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| 1 | 10 | 11 |
| 2 | 10 | 12 |
| 3 | 10 | 13 |
| 4 | 14 | 13 |
| 5 | 15 | 16 |
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| 3 | 10 | 13 |
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The partnership deed provided that interest on capital will be allowed @10% p.a. The amount of interest on Ishita's capital will be:
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Following is their Profit & Loss Appropriation Account:
| Particulars | (₹) | Particulars | (₹) |
| To Interest on Capital | By Profit & loss account (After manager’s commission) | __(2)__ | |
| Richa | ______ | ||
| Anmol | ______ | ||
| To Anmol’s Salary a/c | 12,500 | ||
| To Profit transferred to: Richa’s Capital A/C (1) | __(1)__ | ||
| Anmol’s Capital A/c | ______ | ||
| ______ | ______ |
The amount to be reflected in blank (1) will be:
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Following is their Profit & Loss Appropriation Account:
| Particulars | (₹) | Particulars | (₹) |
| To Interest on Capital | By Profit & loss account (After manager’s commission) | __(2)__ | |
| Richa | ______ | ||
| Anmol | ______ | ||
| To Anmol’s Salary a/c | 12,500 | ||
| To Profit transferred to: Richa’s Capital A/C (1) | __(1)__ | ||
| Anmol’s Capital A/c | ______ | ||
| ______ | ______ |
The amount to be reflected in blank (2) will be:
