Accountancy · Class 12 Commerce
Ch 8Financial Statement Analysis — Class 12 Accountancy, concept-first.
A company's financial statements — the Balance Sheet and the Statement of Profit and Loss — present a large number of figures, but on their own, a single year's figures say little about whether the business is doing well, getting stronger, or heading into trouble.
Key concepts
Hover a concept to preview it and jump to its most relevant Q&A.
Meaning, Objectives and Limitations of Financial Statement Analysis
Financial Statement Analysis critically examines the relationships between items of the Balance Sheet and Statement of Profit and Loss to assess profitability, liquidity, solvency and efficiency, and to help management,…
Most relevant Q&A
- What is meant by Financial Statement Analysis? State any four of its objectives.Free
- State the limitations of Financial Statement Analysis.Free
- The financial statements do not exhibit : (a) Long-term data (b) Non-monetary data (c) Past data (d) Short-term dataPreview
- Accounting report prepared according to the requirements of the user is ________. (a) Trial balance (b) Routine accounting report (c) Balanc…Preview
- The financial statements do not exhibit : (a) Short-term data (b) Non-monetary data (c) Long-term data (d) Past dataPreview
Chapter contents
The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.
Meaning, Objectives and Limitations of Financial Statement Analysis
A company's financial statements — the Balance Sheet and the Statement of Profit and Loss — present a large number of figures, but on their own, a single year's figures say little about whether the bu…
Tools of Financial Statement Analysis
A number of established techniques ('tools') are used to analyse financial statements, each highlighting a different aspect of a company's performance and position:
Comparative Statements
The percentage change for any item is calculated as:
Common-Size Statements
Unlike a comparative statement, which highlights the change between periods, a common-size statement highlights the internal proportions within a single period, making it especially useful for compari…
Trend Analysis
Trend Percentage = (Figure of the current year ÷ Figure of the base year) × 100
Questions for Practice
This set of questions checks your understanding of the meaning, objectives and limitations of financial statement analysis, its tools, and the preparation of comparative statements, common-size statem…
Sample & Board Papers
Sample papers and previous-year board questions for this subject.
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- Q1The financial statements do not exhibit : (a) Long-term data (b) Non-monetary data (c) Past data (d) Short-term dataPreview
- Q2Expenses for a business for the first year were ₹ 80,000. In the second year, it was increased to ₹ 88,000. What is the trend percentage in…Preview
- Q3From the following particulars, prepare comparative income statement of Mary Co. Ltd. | Particulars | 2015-16 (₹) | 2016-17 (₹) | | --- | --…Preview
- Q4Accounting report prepared according to the requirements of the user is ________. (a) Trial balance (b) Routine accounting report (c) Balanc…Preview
- Q5The financial statements do not exhibit : (a) Short-term data (b) Non-monetary data (c) Long-term data (d) Past dataPreview
- Q6Which of the following statements is not true ? (a) Trend analysis refers to the study of movement of figures for one year. (b) Notes and sc…Preview
- Q7From the following particulars, prepare comparative income statement of Tharun Co. Ltd. | Particulars | 2016 - 17 (₹) | 2017 - 18 (₹) | | --…Preview
- Q8From the following particulars of Maria Ltd. and Kala Ltd., prepare common-size income statement for the year ended 31st March 2019. | Parti…Preview
- Q9(a) From the following particulars, prepare comparative balance sheet of Malar Ltd. as on 31st March, 2016 and 31st March, 2017. | Particula…Preview
- Q10The term "fund" refers to : (a) Fixed Assets (b) Current Liabilities (c) Non-current Assets (d) Working CapitalPreview
- Q11In a Common-size Balance Sheet, if the percentage of non-current Asset is 85, what would be the percentage of Current Assets ? (a) 15 (b) 18…Preview
- Q12From the following particulars of Kumar Ltd., prepare a Common-size income statement for the year ended 31st March 2018. | Particulars | 201…Preview
- Q13Expenses for a business for the first year were ₹ 80,000. In the second year, it was increased to ₹ 88,000. What is the trend percentage in…Preview
- Q14Which of the following is not a tool of financial statement analysis ? (a) Comparative statement (b) Trend analysis (c) Standard costing (d)…Preview
- Q15Prepare Common-size income statement for the following particulars of Raja Ltd., for the year ended 31st March, 2017. | Particulars | 2016 -…Preview
- Q16(a) From the following information, calculate trend percentage for Mullai Ltd. | Particulars | 2015-16 | 2016-17 | 2017-18 | | --- | --- | -…Preview
- Q17Which one of the following is not a function of Fund Flow analysis ? (a) financial planning of a business concern (b) liquidity and solvency…Preview
- Q18Which of the following is not a tool of Financial Statement analysis ? (a) Trend analysis (b) Standard costing (c) Comparative statement (d)…Preview
- Q19What are Financial Statements ?Preview
- Q20From the following particulars, prepare comparative Income Statement of Barani Ltd. | Particulars | 2022 - 23 ₹ | 2023 - 24 ₹ | | --- | ---…Preview
- Q21A Limited company's sales has increased from ₹ 1,00,000 to ₹ 1,25,000. How does this appear in comparative income statement ? (a) − 120% (b)…Preview
- Q22From the following particulars, prepare comparative income statement of Arul Ltd. | Particulars | 2015-16 (₹) | 2016-17 (₹) | | --- | --- |…Preview
- Q23Explain the steps involved in preparing comparative statement.Preview
- Q24(a) Calculate trend percentages for the following particulars of Palai Ltd. (₹ in lakhs) | Particulars | Year 1 | Year 2 | Year 3 | | --- |…Preview
More questions
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- Q1What is meant by Financial Statement Analysis? State any four of its objectives.Free
- Q2State the limitations of Financial Statement Analysis.Free
- Q3State any four tools (techniques) of Financial Statement Analysis.Free
- Q4From the following figures, prepare a Comparative Statement of Profit and Loss: Revenue from Operations — 2023 ₹10,00,000, 2024 ₹12,00,000;…Preview
- Q5What is the significance (utility) of preparing a Comparative Statement?Preview
- Q6Using the same figures as Question 4, prepare a Common-Size Statement of Profit and Loss for both years, expressing each item as a percentag…Preview
- Q7Distinguish between a Comparative Statement and a Common-Size Statement.Preview
- Q8A company's Revenue from Operations for three years was: 2022 ₹8,00,000; 2023 ₹10,00,000; 2024 ₹12,00,000. Taking 2022 as the base year, cal…Preview
- Q9State the uses (importance) of Trend Analysis.Preview
- Q10A company's Cost of Materials Consumed over three years was: 2022 ₹5,00,000; 2023 ₹6,00,000; 2024 ₹6,60,000. Its Other Expenses over the sam…Preview