Tag: tools of financial statement analysis - comparative and common-size statements

Questions Related to tools of financial statement analysis - comparative and common-size statements

______________ a snapshot of the financial condition of the firm at a particular time.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. The balance sheet provides

  2. The income statement provides

  3. The cash flow statement provides

  4. All of the above provides

Show answer
Correct Option: A
Explanation:

The balance sheet provides a snapshot of the financial condition of the firm at a particular time. It shows the balance of assets, equities and liabilities at a single moment of time. 


The Income Statement is one of a company's core financial statements that shows their profit and loss. The P&L statement shows a company's ability to generate sales, manage expenses, and create profits. over a period of time.

Cash flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.

Comparative Statement of profit and loss is the horizontal analysis of Statement of profit and loss which shows :

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. the operating results for the compared accounting periods.

  2. changes in data in terms of absolute amount.

  3. percentage from one period to another.

  4. all of the above

Show answer
Correct Option: D
Explanation:

Comparative Statement of profit and loss is the horizontal analysis of statement of profit and loss which shows the operating results for the compared accounting periods, changes in data in terms of absolute amount and percentage from one period to another.  Horizontal analysis is a trend analysis where the firm compares ratios, statements etc over a period of time. 

Comparative Statements is prepared to check _______.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. increase or decrease as on different dates

  2. balances of account as on different dates

  3. summaries of different operational activities of different periods

  4. All of the above

Show answer
Correct Option: D
Explanation:

Comparative analysis is comparison of various ratios balances of different years. It is basically done to understand the trend off the company. Comparative statements is prepared to check increase or decrease as on different dates, balances of accounts as on different dates and summaries of different operational activities of different periods. 

Comparative Income statement shows the _________________.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. Revenue and expenses in absolute values.

  2. Increase or decrease of revenues and expenses in absolute values.

  3. Percentage changes in revenues and expenses.

  4. All of the above

Show answer
Correct Option: D

Comparative statement when prepared for comparing the enterprise's financial statements with that of another enterprise, is known as Inter-firm comparison.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Comparative analysis is comparison of various ratios balances of different years. It is basically done to understand the trend of the company. When the comparison is done between the firms its known as inter firm comparison. 

Comparative Statement when prepared for comparing the enterprise's financial statements of two or more years, is known Intra-firm Comparison.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Comparative analysis is comparison of various ratios balances of different years of the same firm. When the comparison is done within the firm its known as intra-firm comparison. It is basically done to understand the trend of the company. 

Comparative Financial Statements mean comparative study of items or components of financial statements for two or more years or with that of other enterprises.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Comparative Financial statements mean comparative study of items or components of financial statements of two or more years with that of the same or other company. It is comparison of various ratios, balances, statements of different years of the company. It is basically done to understand the trend off the company.

Comparative financial statements are prepared for ____________ comparison.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. inter-firm

  2. intra-firm

  3. both (a) and (b)

  4. none of these

Show answer
Correct Option: C

Which of the following are the steps followed for preparation of comparative statements?
a. List out absolute figures in rupees related to two points of time.
b. Find out changes in absolute figures by subtracting the first year from second year and indicating the change as increase or decrease.
c. Then calculate percentage for decrease amount.
d. Then calculate the percentage change.  

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. a, b, and c

  2. a, b, and d

  3. b, c, and d

  4. a, b, c, d

Show answer
Correct Option: B
Explanation:

Comparative statement refers to the profit and loss account and balance sheet prepared by providing columns for the figures for both the current year as well as for the previous year. The following steps may be followed to prepare the comparative statements:

1. List out absolute figures in rupees related to two points of time.
2. Find out change in absolute figures by subtracting the first year from the second year and indicate  the change as increase (+) or decrease (-).
3. Calculate the percentage change as follows:
 (Second year absolute fig./ First year absolute fig.) x 100 

____________ statements refer to the Profit and Loss Account and Balance Sheet prepared by providing columns for the figures for both the current year as well as for the previous year and for the changes during the year.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. Common size

  2. Comparative

  3. Income

  4. Both A and C

Show answer
Correct Option: B
Explanation:

Comparative statements refers to the profit and loss account and balance sheet prepared by providing columns for the figures for both current year as well as for the previous year for the changes during the year. Comparative statements are prepared basically to understand the trend of the company. Hence, its also known as trend analysis.