Explain the methods of financial statement analysis

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Reference no: EM131698655

MANAGEMENT ACCOUNTING QUESTIONS -

1. What do you understand by Management Accounting? What are its objectives and limitations?

2. Explain the methods of financial statement analysis.

3. What is variance? Indicate its significance to the Management.

4. Prepare a cash flow statement from the following data:

	31.12.2001	31.12.2002
	Rs.	Rs.
Cash	2,000	2,500
Bills receivable	2,400	2,700
Inventories	3,100	3,200
Other current assets	800	700
Fixed assets	5,000	5,800
Accumulated depreciation	2,100	2,500
Bills payable	2,000	2,100
Long-term debt	1,400	1,300
Equity share capital	5,000	5,300
Profit and Loss a/c	2,800	3,700

Notes:

(a) Fixed assets costing Rs. 1,200 were purchased for cash.

(b) Fixed assets (original cost Rs. 400, accumulated depreciation Rs. 150) were sold for Rs. 200.

(d) Dividend paid amounted to Rs. 300 in 2002.

(e) Reported income for 2002 was Rs. 1,200.

Q5. Following is the Balance Sheet as on 31^st December 2005:

Liabilities	Rs.	Assets	Rs.
Equity share capital	2,00,000	Machinery	2,00,000
10% preference share capital	1,00,000	Land and Building	2,00,000
20% Debentures	1,00,000	Stock	1,50,000
Profit and Loss a/c	1,00,000	Sundry debtors	50,000
Bank loan (long-term)	50,000	Cash	1,00,000
Sundry creditors	1,00,000
Bills payable	50,000
	7,00,000		7,00,000

Required - Calculate:

(a) Current Ratio.

(b) Proprietary Ratio.

(d) Fixed Assets Ratio.

Q6. From the following information calculate:

(a) P/V ratio.

(b) Break-even point.

	Rs.
Total sales	3,60,000
Selling price per unit	100
Variable cost per unit	50
Fixed cost	1,00,000

(d) If the selling price is reduced to Rs. 90, by how much is the margin of safety reduced?

Q7. The standard mix of a product X is shown below:

Raw material A : 30 units @ Rs. 2 each.

Raw material B : 70 units @ Rs. 3 each.

Standard loss is 10% of input.

Actual mix:

Raw material A : 34 units @ Rs. 2 each.

Raw material B : 66 units @ Rs. 3 each.

Actual loss is 15% of input.

Required - Calculate:

(a) Material cost variance.

(b) Material price variance.

(d) Material mix variance.

(e) Material yield variance.

Q8. From the following Balance Sheet of Rolson Ltd, prepare a fund flow statement:

Liabilities	31.3.2005	31.3.2006	Assets	31.3.2005	31.3.2006
	Rs.	Rs.		Rs.	Rs.
Equity share capital	30,000	37,500	Cash	3,750	5,250
Redeemable preference share capital	15,000	12,000	Stock	11,250	12,000
General reserve	4,500	5,250	Bills receivable	5,250	750
Profit & Loss a/c	3,750	5,250	Land and Building	22,500	33,000
Sundry creditors	9,000	12,000	Goodwill	9,000	7,500
Expenses outstanding	3,000	1,500	Debtors	13,500	15,000
	65,250	73,500		65,250	73,500

Additional Information:

(a) Depreciation of Rs. 1,500 is charged on land and buildings.

(b) Building amounting to Rs. 3,000 was sold for Rs. 2,820.

Q9. From the following information prepare a Balance Sheet:

Gross profit - Rs. 80,000

Gross profit to cost of goods sold - 1/3

Stock turnover - 6 times

Opening stock - Rs. 36,000

Debtors velocity (Year 360 days) - 72 days

Current assets - Rs. 1,50,000

Creditors velocity - 90 days

Bills receivable - Rs. 20,000

Bills payable - Rs. 5,000

Fixed assets turnover ratio - 8 times

Notes: Turnover refers to cost of sales.

Q10. The following data are available in respect of product './c produced by Venkat Ltd. Sales Rs. 70,000; Direct material Rs. 30,000; Direct labour Rs. 15,000; Variable overheads Rs, 7,000; Fixed overheads Rs. 10,000. The company now proposes to introduce a new product 'L' so that sales may be increased by Rs. 30,000. There will be no increase in fixed costs. The estimated variable cost of product 'L' are:

Materials Rs. 15,000; Labour Rs. 7,000; Overhead Rs. 5,500. Advice whether the product L will be profitable or not with detailed workings.

Reference no: EM131698655

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