NCERT Class 12 Accountancy Part 2 Chapter 4 Analysis of Financial Statements Extra Questions and Answers
Class 12 Accountancy Part 2 Chapter 4 Extra Questions and Answers – Analysis of Financial Statements. Here in this Page Class XII Students can Learn Extra Questions & Answer 4th Chapter Accountancy Part 2 fully Inside.
We Provided Here Analysis of Financial Statements Accountancy Part 2 Chapter 4 Very Short Type Questions and Short Type Questions.
Board |
NCERT |
Class |
12 |
Book Title |
Accountancy Part II |
Chapter |
4 |
Chapter Name |
Analysis of Financial Statements |
Topic |
Extra Questions |
(Q1) Define “Financial statement Analysis”.
Ans: “Financial statement analysis” is a study of relationships among the various financial factors in a business, as disclosed by a single set of statement.
(Q2) Mention any two features of financial analysis.
Ans: (i) To classify the items contained in financial statements in convenient and rational groups.
(ii) To make comparisons between various groups to draw various conclusion.
(Q3) Explain briefly “External analysis” as a method of financial statement analysis.
Ans: This type financial analysis is conducted by external parties to business i.e. – investors, banks, financial institutions, creditors etc. Their analysis is based upon published financial statements as they do not have an access to internal records of business.
(Q4) What is Intra-firm Analysis?
Ans: This is a method of comparison of financial variables of an enterprise for two or more accounting periods and is often referred as “Trend Analysis” or “Time series analysis”.
(Q5) What is the purpose of “Internal analysis” of financial records or data is an organisation?
Ans: ‘Internal analysis” of financial statement is conducted by the executives of an organisation who have access to detailed internal records of the business for the purpose of assisting the management in taking important financial decisions.
(Q6) What is the utility of static analysis?
Ans: Static or vertical analysis of financial helps to analyse data using proper tools like ratios and involves a quantitative study of relationship of the like balance sheet or profit & loss A/c for a period.
(Q7) How does the analysis of financial statement helps to measure the solvency of the firm?
Ans: The solvency of the firm is determined by liquidity ratios like current ratio, quick ratio which is a part of analysis of financial statements.
In case you are missed :- Previous Chapter Extra Questions
(Q8) What purpose does financial statement analysis serve to Government?
Ans: The analysis of financial statement helps the government to judge the progress of the industry on the desired lines and can determine the industries that require financial assistance.
(Q9) What is the interest of shareholders in the analysis of financial statement?
Ans: The analysis financial statement serves the following purposes to shareholders:
(a) They can determine the present and future earnings of the business.
(b) They can get assurance about their investment.
(Q10) How can the financial strength of a business be judged?
Ans: The financial strength of a business can be judged on the basis of the following:
(a) Earning capacity and profitability
(b) Creditaiosthiness and ability to pay its dividend.
(Q11) Why do you think financial statement analysis ignores qualitative elements?
Ans: The quantitative elements like – quantity of product management, employees etc are ignored while carrying out the analysis of financial statements.
(Q12) How the earning capacity of a business is assessed by financial statement analysis?
Ans: The earning capacity of a business is assessed by its “profitability ratio” in the process of analysis of financial statements.
(Q13) What does the term “cost of material consumed” implies in the preparation of statement of profit and loss?
Ans: It implies cost of raw materials and other materials consumed in manufacturing of goods, i.e.: opening stock of raw materials + net purchase of materials – closing stock of raw materials.
In case you are missed :- Next Chapter Extra Questions
Also see: Analysis of Financial Statements mcq question answer