Book-Keeping and Accountancy · Class 12 Commerce
Ch 9Analysis of Financial Statements — Class 12 Book-Keeping and Accountancy, concept-first.
Every limited company, partnership firm or sole proprietorship prepares two principal financial statements at the close of the accounting year — the Trading and Profit & Loss Account (measuring profitability) and the Balance Sheet (measuring financial position).
Key concepts
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Meaning, Objectives and Limitations of Analysis of Financial Statements
Analysis of financial statements is the process of critically examining a firm's Trading and Profit Loss Account and Balance Sheet, breaking the figures down, comparing them, and establishing relationships between them…
Most relevant Q&A
- Explain the meaning of Analysis of Financial Statements. State any four objectives of such analysis, and name the parties who are interested…Free
- State any four limitations of Analysis of Financial Statements.Preview
- Do you agree or disagree with the following statement: Financial statement includes only balance sheet.Preview
Chapter contents
The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.
Meaning, Objectives and Parties Interested in Analysis of Financial Statements
Every limited company, partnership firm or sole proprietorship prepares two principal financial statements at the close of the accounting year — the Trading and Profit Loss Account (measuring profit…
Types of Financial Statement Analysis and Its Limitations
Financial statement analysis can be classified along two independent dimensions — WHO performs the analysis, and WHAT method is used.
Tools of Analysis — Comparative Statements and Common-Size Statements
Particulars Previous Year (₹) Current Year (₹) Absolute Change (₹) % Change --------------- Item X ... ... Current − Previous (Absolute Change ÷ Previous Year) × 100
Ratio Analysis — Meaning, Advantages and Classification
Ratio Analysis is the technique of expressing the mathematical relationship between two related figures drawn from the financial statements as a proportion, a rate, or a percentage, so as to interpret…
Liquidity Ratios and Solvency Ratios
Current Ratio = Current Assets ÷ Current Liabilities
Profitability Ratios and Activity (Turnover) Ratio
Gross Profit Ratio = (Gross Profit ÷ Net Sales) × 100
Sample & Board Papers
Sample papers and previous-year board questions for this subject.
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- Q1From financial statement analysis the creditors are specially interested to know _______. (a) Liquidity (b) Profits (c) Sale (d) Share Capit…Preview
- Q2Following is the Balance Sheet of Param Company Ltd. as on 31st March, 2019 and 31st March, 2020: | Liabilities | 31.3.2019 (₹) | 31.3.2020…Preview
- Q3From the following information, calculate Current Assets: Debtors ₹ 60,000, Creditors ₹ 30,000, Bills payable ₹ 20,000, Stock ₹ 30,000, Loos…Preview
- Q4Convert following Trading Account and Profit and Loss Account into Vertical Income Statement: | Dr. | Trading, Profit and Loss Account for t…Preview
- Q5Give one word/term/phrase for the following statement. An asset which can be converted into cash immediately.Preview
- Q6Convert the following Trading and Profit and Loss Account into Vertical Income Statement: | Dr. | Trading, Profit and Loss Account (for the…Preview
- Q7Do you agree or disagree with the following statement: Financial statement includes only balance sheet.Preview
- Q8From the following information, find out the current ratio: | Total assets | ₹ 22,000 | | --- | --- | | Fixed assets | ₹ 10,000 | | Capital…Preview
- Q9Calculate the net profit ratio from the following data: | (i) Sales | ₹ 76,000 | | --- | --- | | (ii) Cost of goods sold | ₹ 52,000 | | (iii…Preview
- Q10| Dr. | Trading and Profit and Loss Account for the year ended 31 st March 2022 | Cr. | | | --- | --- | --- | --- | | Particulars | Amount (…Preview
- Q11Write a word / term / phrase as a substitute for the following statement: The ratio measuring the relationship between gross profit and net…Preview
- Q12Q. 2. OR (A) Give the meaning and types of 'comparative financial statement' and explain the steps to prepare it. (4) (B) Give the meaning o…Preview
More questions
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- Q1Explain the meaning of Analysis of Financial Statements. State any four objectives of such analysis, and name the parties who are interested…Free
- Q2State any four limitations of Analysis of Financial Statements.Preview
- Q3Distinguish between Horizontal Analysis and Vertical Analysis of financial statements.Preview
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- Q5From the following figures of a trading concern for the years ended 31st March 2025 and 31st March 2026, prepare a Comparative Balance Sheet…Free
- Q6From the following Trading and Profit & Loss Account figures for the year ended 31st March 2026, prepare a Common-Size Income Statement, exp…Free
- Q7From the following Balance Sheet as on 31st March 2026, compute the Current Ratio and the Quick (Liquid) Ratio: | Liabilities | ₹ | Assets |…Free
- Q9From the Balance Sheet given in Practical Problem 3 above, compute the Debt-Equity Ratio and the Proprietary Ratio.Preview
- Q10From the Trading and Profit & Loss Account figures given in Practical Problem 2 above, compute the Gross Profit Ratio and the Net Profit Rat…Preview
- Q11From the same figures given in Practical Problem 2 above, compute the Operating Ratio and the Operating Profit Ratio.Preview
- Q12From the same figures (Net Sales ₹10,00,000; Net Profit ₹1,60,000, taken here as Net Profit before Interest and Tax since no separate intere…Preview
- Q13A firm's Cost of Goods Sold for the year ended 31st March 2026 was ₹7,00,000. Its Opening Stock was ₹60,000 and Closing Stock ₹80,000 (as gi…Preview