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Chapters
2: Goodwill : Concept and Valuation
3: Admission of a Partner
4: Retirement or Death of a Partner
5: Dissolution of Partnership Firm
6: Company Accounts - Issue of Shares
7: Company Accounts - Issue of Debentures
8: Company Accounts - Redemption of Debentures
9: Financial Statements of Companies
▶ 10: Financial Statements Analysis
11: Tools for Financial Analysis : Comparative Statements
12: Common Size Statements
13: Cash Flow Statement
14: Ratio Analysis
15: Project Work
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Solutions for Chapter 10: Financial Statements Analysis
Below listed, you can find solutions for Chapter 10 of CISCE D. K. Goel for Accountancy Volume 1 and 2 [English] Class 12 ISC.
D. K. Goel solutions for Accountancy Volume 1 and 2 [English] Class 12 ISC 10 Financial Statements Analysis SHORT ANSWER QUESTIONS [Pages 10.8 - 10.9]
What is meant by ‘Financial Analysis’?
List any one objective of analysing the financial statements.
What is Horizontal Analysis?
What is Vertical Analysis?
List any two uses of analysing the financial statements.
Give one limitation of financial analysis.
What is the interest of shareholders or Investors in the analysis of financial statements?
State the interest of tax authorities in the analysis of financial statements.
What is the interest of lenders or Bankers in the analysis of financial statements?
Give two areas of interest for management while analysing the financial statements.
How can the financial strength of a business enterprise be judged?
How the ‘solvency’ of a business is assessed by Financial Statement Analysis?
How the ‘Earning Capacity of a business’ is assessed by Financial Statement Analysis?
How is ‘window dressing’ a limitation of Financial Statement Analysis?
Explain how Financial Statements Analysis ignores qualitative elements?
Give any two differences between horizontal analysis and vertical analysis of financial statements.
What is meant by inter-firm analysis?
D. K. Goel solutions for Accountancy Volume 1 and 2 [English] Class 12 ISC 10 Financial Statements Analysis OBJECTIVE TYPE QUESTIONS [Pages 10.9 - 10.18]
Choose the Best Alternate: Multiple Choice Questions
Feature of financial analysis is to present the data contained in financial statements in:
Easy form
Convenient and rational groups
Comparable form
All of the Above
Which one of the following analysis is considered as a dynamic analysis?
Vertical analysis
Horizontal analysis
Internal analysis
External analysis
Which analysis is considered as static:
Horizontal Analysis
Vertical Analysis
Internal Analysis
External Analysis
Which analysis is based only on one year’s data:
Cash Flow Statement
Dividend Analysis
Vertical Analysis
Horizontal Analysis
Main objective of analysis of financial statements is ______.
To know the financial strength
To make a comparative study with other firms
To know the efficiency of management
All of the Above
Analysis of Financial Statements is significant:
For Creditors
For Managers
For Employees
For all of the above
Financial analysis becomes significant because it ______.
Ignores price level changes
Measures the efficiency of business
Lacks qualitative analysis
Is effected by personal bias
When bad position of the business is tried to be depicted as good, it is known as ______.
Personal Bias
Price Level Changes
Window Dressing
All of the Above
For whom the analysis of financial statements is not significant?
Investor
Government
Ambassador of India
Company’s Employee
Main limitation of analysis of financial statements is:
Affected by window dressing
Difficulty in forecasting
Do not reflect changes in price level
All of the Above
Which of the following is a limitation of financial analysis?
It is just a study of reports of the company.
It judges the ability of the firm to repay its debts.
It identifies the reasons for change in financial position.
It ascertains the relative importance of different components of the financial position of the firm.
Which of the following is not a limitation of analysis of financial statements?
Affected by personal bias
Inter firm comparative study possible.
Lack of Qualitative Analysis
Ignores price level changes.
Which of the following is not an objective of Analysis of Financial Statements:
To judge the financial health of the firm.
To judge the short-term and long-term liquidity position of the firm.
To judge the reasons for change in the profitability of the firm.
To judge the variations in the accounting practices of the business followed by different enterprises.
Financial analysis become useless because it ______.
Measures the profitability
Measures the Solvency
Lacks Qualitative Analysis
Makes a comparative study
Parties interested in financial analysis are ______.
Investors
Government
Financial Institutions
All of the Above
Main limitation of financial analysis is ______.
To know earning capacity
To know financial strength
Do not reflect changes in price level
Comparative study with other firms
For whom analysis of financial statements is not significant?
Political Adviser of Prime Minister
Investors
Management
Financial Institutions
Which of the following is not a limitation of the analysis of financial statements?
Window dressing
Price level changes ignored
Subjectivity
Intra firm comparison possible
Which of the following statements are false?
- When all the comparative figures in a balance sheet are stated as percentage of the total, it is termed as horizontal analysis.
- When financial statements of several years are analysed, it is termed as vertical analysis.
- Vertical analysis is also termed as time series analysis.
Both (i) and (ii)
Both (i) and (iii)
Both (ii) and (iii)
All three (i), (ii), (iii)
Which of the following is a tool of Analysis of Financial Statements:
- Cash Flow Statement
- Statement of Profit and Loss
- Notes to Accounts
- Balance Sheet
Choose the correct option:
(i)
(i) and (ii)
(ii)
(i), (ii) and (iv)
Which of the following are the tools of Vertical Analysis?
- Ratio Analysis
- Comparative Statements
- Common Size Statements
Choose the correct option:
Only (iii)
Both (i) and (iii)
Both (i) and (ii)
Only (i)
Which of the following is not a limitation of ‘Analysis of Financial Statements’?
It is just a study of the reports of the company.
It does not consider price level changes.
It may be misleading without the knowledge of the changes in accounting procedures followed by a firm.
It ascertains the relative importance of different components of the financial position of the firm.
Which of the following are not tools of Financial Analysis?
- Cash Flow Statement
- Income Statement
- Balance Sheet
- Ratio Analysis
(i) and (ii)
(ii) and (iv)
(ii) and (iii)
(iii) and (iv)
Financial statement analysis includes ______ and ______ of financial statements.
Analysis, preparation
Preparation, interpretation
Preparation, analysis
Analysis, interpretation
Which of the following is/are not the objectives of the Financial Statements of a company?
- It provide information about the economic resources and obligations of a business.
- To provide information about the aptitude of the human resources.
- To provide information about the cash flow.
- To judge the efficiency/effectiveness of the management.
- To provide information about the activities of the business affecting the society.
Choose the most appropriate answer from the options given below:
(ii) & (iii) only.
(ii) only.
(iv) only.
(ii) & (v) only.
‘Freedom to Choose the method of depreciation’ refers to which limitation of financial statement analysis:
Historical analysis
Qualitative aspect ignored
Not free from bias
Ignore Price level Changes
Which of the following is not a tool of Analysis of Financial Statements?
Ratio Analysis
Comparative Statement
Statement of Profit & Loss
Cash Flow Statement
Analysis of Financial Statements is useful and significant to different users. Which of the following users is particularly interested in the firm’s ability to meet their claims over a very short period of time?
Labour Unions
Trade Payables
Top Management
Finance Manager
When an analyst analysis the financial statements of an enterprise over a number of years, the analysis is called ______ analysis.
Static
External
Horizontal
Vertical
Assertion-Reason Questions: Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R).
Assertion (A): Financial analysis is a systematic process of analysing the financial statements for presenting them in a understandable form for the purpose of decision making.
Reason (R): Various tools for analysing the financial statements are Comparative Statements, Common-size Statements, Accounting Ratios, Cash Flow Statement etc.
In the context of the above two statements, which of the following is correct?
Both (A) and (R) are correct and (R) is the correct reason of (A).
Both (A) and (R) are correct but (R) is not the correct reason of (A).
Only (R) is correct.
Both (A) and (R) are wrong.
Assertion (A): Horizontal analysis can be done by preparing Comparative Statements.
Reason (R): In Horizontal analysis figures of two or more years are placed side-by-side to facilitate comparison. As such, Comparative Statements are Horizontal Analysis.
In the context of the above two statements, which of the following is correct?
Both (A) and (R) are true, but (R) is not correct explanation of (A).
Both (A) and (R) are true and (R) is the correct explanation of (A).
Both (A) and (R) are false.
(A) is false, but (R) is true.
Assertion (A): In Vertical Analysis figures of a single year are analysed and it can be done by preparing Common-size Statements.
Reason (R): In Horizontal Analysis figures of two or more years are analysed and it can be done by preparing Comparative Statements.
In the context of the above two statements, which of the following is correct?
Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Both (A) and (R) are true and (R) is the correct explanation of (A).
Both (A) and (R) are false.
(A) is false, but (R) is true.
Assertion (A): With the help of financial analysis, short term lenders are interested in knowing the liquidity of the company.
Reason (R): With the help of financial analysis, investors assess the profitability of the Company.
In the context of the above two statements, which of the following is correct?
Both (A) and (R) are correct and (R) is the correct reason of (A).
Both (A) and (R) are correct but (R) is not the correct reason of (A).
Only (R) is correct.
Both (A) and (R) are wrong.
Assertion (A): Financial analysis suffer from the limitation of ignoring price level changes.
Reason (R): Financial analysis is based upon financial statements which do not show price level changes because all items in financial statements are recorded at cost and value of money in the latest year is not the same as it was in the previous years.
In the context of the above two statements, which of the following is correct?
(A) and (R) both are correct and (R) correctly explains (A).
Both (A) and (R) are correct but (R) does not explain (A).
Both (A) and (R) are incorrect.
(A) is correct but (R) is incorrect.
Assertion (A): Financial analysis is affected by window-dressing.
Reason (R): Window-dressing refers to the presentation of a better financial position than the actual position by manipulating the books of accounts. Since financial analysis is based upon financial statements it is also affected by window-dressing.
In the context of the above two statements, which of the following is correct?
(A) and (R) both are correct and (R) correctly explains (A).
Both (A) and (R) are correct but (R) does not explain (A).
Both (A) and (R) are incorrect.
(A) is correct but (R) is incorrect.
Assertion (A): Quality of management and staff, firms ability to develop new products, customer satisfaction, etc., are ignored in financial analysis.
Reason (R): Since financial statements do not record qualitative elements of the business and consider only those items which can be measured in terms of money, financial analysis also ignores qualitative factors.
In the context of the above two statements, which of the following is correct?
(A) and (R) both are correct and (R) correctly explains (A).
Both (A) and (R) are correct but (R) does not explain (A).
Both (A) and (R) are incorrect.
(A) is correct but (R) is incorrect.
Assertion (A): Since financial analysis is strictly based upon financial statements, there is no scope of effect of personal ability and bias of analyst on such analysis.
Reason (R): Financial analysis suffers from personal ability and bias of analyst because analysis is based on financial statements.
In the context of the above two statements, which of the following is correct?
Both (A) and (R) are correct and (R) is the correct reason of (A).
Both (A) and (R) are correct but (R) is not the correct reason of (A).
Only (R) is correct.
Both (A) and (R) are wrong.
Assertion (A): Intra-firm analysis means comparing the financial data of the same firm for two or more accounting periods.
Reason (R): Inter-firm analysis means comparing the financial data of two or more enterprises for the same accounting period.
In the context of the above two statements, which of the following is correct?
Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Both (A) and (R) are true and (R) is the correct explanation of (A).
Both (A) and (R) are false.
(A) is false, but (R) is true.
Assertion (A): Tools for financial analysis include Comparative Statements, Common-size Statements, Balance Sheet, Statement of Profit & Loss etc.
Reason (R): Tools for financial analysis include Comparative Statements, Common-size Statements and Balance Sheet.
In the context of the above two statements, which of the following is correct?
Both (A) and (R) are correct and (R) is the correct reason of (A).
Both (A) and (R) are correct but (R) is not the correct reason of (A).
Only (R) is correct.
Both (A) and (R) are wrong.
Assertion (A): Analysis of Financial Statements helps to assess the current profitability and operational efficiency of the business as a whole as well as its different departments.
Reason (R): Financial Analysis considers the impact of price level changes on the business.
In the context of the above statements, which of the following is correct?
Both (A) and (R) are correct, but (R) is not the correct reason of (A).
Both (A) and (R) are correct and (R) is the correct reason of (A).
Both (A) and (R) are incorrect.
(A) is correct, but (R) is incorrect.
Statement I: In ‘Vertical Analysis’ figures of two or more years are analyzed and it can be done by preparing ‘Comparative Statements’.
Statement II: In ‘Horizontal Analysis’ figures of a single year are analyzed and it can be done by preparing ‘Common-Size’ Statements.
In the light of the above statements, choose the most appropriate answer from the options given below:
Both Statement I and Statement II are correct.
Both Statement I and Statement II are incorrect.
Statement I is correct but Statement II is incorrect.
Statement I is incorrect but Statement II is correct.
Statement I: The process of critical evaluation of Financial Information contained in the financial statements in order to understand and make decisions regarding the operations of the firm is called ‘Financial Analysis’.
Statement II: The term ‘Financial Analysis’ means only the ‘Analysis’ of financial statements using various tools like Accounting Ratio and ‘Cash Flow’ etc.
In the light of the above statements, choose the most appropriate answer from the options given below:
Both Statement I and Statement II are correct.
Both Statement I and Statement II are incorrect.
Statement I is correct but Statement II is incorrect.
Statement I is incorrect but Statement II is correct
Solutions for 10: Financial Statements Analysis
D. K. Goel solutions for Accountancy Volume 1 and 2 [English] Class 12 ISC chapter 10 - Financial Statements Analysis
Shaalaa.com has the CISCE Mathematics Accountancy Volume 1 and 2 [English] Class 12 ISC CISCE solutions in a manner that help students grasp basic concepts better and faster. The detailed, step-by-step solutions will help you understand the concepts better and clarify any confusion. D. K. Goel solutions for Mathematics Accountancy Volume 1 and 2 [English] Class 12 ISC CISCE 10 (Financial Statements Analysis) include all questions with answers and detailed explanations. This will clear students' doubts about questions and improve their application skills while preparing for board exams.
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Concepts covered in Accountancy Volume 1 and 2 [English] Class 12 ISC chapter 10 Financial Statements Analysis are Common-Size Statement, Comparative Financial Statement, Tools of Analysis of Financial Statements, Concept of Financial Statement Analysis, Methods of Financial Statement Analysis, Comparative Balance Sheet, Comparative Income Statement, Common Size Balance Sheet, Common-Size Income Statement, Trend Analysis.
Using D. K. Goel Accountancy Volume 1 and 2 [English] Class 12 ISC solutions Financial Statements Analysis exercise by students is an easy way to prepare for the exams, as they involve solutions arranged chapter-wise and also page-wise. The questions involved in D. K. Goel Solutions are essential questions that can be asked in the final exam. Maximum CISCE Accountancy Volume 1 and 2 [English] Class 12 ISC students prefer D. K. Goel Textbook Solutions to score more in exams.
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