Dibrugarh University - Financial Statement Analysis (2012 - Old Course)

1. (a) “Analysis of financial statements is affected by window dressing and bias motive of the analyst.” Explain. Also define the tools used for analysing the financial statements.   7+7=14
(b) Write short notes on the following:  3.5x4=14
(i) Purpose of analysis of financial statements
(ii) Limitation of analysis of financial statements
(iii) Distinction between common size statements and financial statements
(iv) Adoption of Indian GAAP in preparation of financial statements

2.       (a) From the following information presented by BCPL Ltd. For the year ended 31 – 12 – 2010, prepare balance sheet:  14
Sales to net worth                                        5times
Current liabilities to net worth                       50%
Total debts to net worth                               60%
Fixed assets to net worth                              60%
Current ratio                                                 2 : 1
Sales to stock                                               10 times
Debtor’s velocity                                           9 times
Annual sales                                              Rs. 1500000
40% of sales were made on cash.

(b) Discuss the significance of the following:  3.5x4=14
(i) Current ratio
(ii) Debtor’s turnover ratio
(iii) Debt – Equity ratio
(iv) Return on investment

3.       (a) Discuss the qualitative characteristics which make financial reporting useful. “Financial reporting should be a part of annual report of the companies.” Explain.   7+7=14
(b) What are the provisions of AS 25 with regard to recognition and measurement related to interim financial reporting? How does interim financial reporting differ from segment reporting?  7+7=14

4.       (a) How should social accounting information be reported in published annual reports? Distinguish between financial statement related for general price – level changes and current value financial statements.   7+7=14
(b) Disclosure of corporate governance practices followed by indian companies in their published annual reports is the best way to provide information to its shareholders. Comment.   14

5.       (a) “ Accounting standards are something less than the law but more than the professional guidelines.” Elaborate the statement indicating importance of accounting standards. Do you agree with the decision of ICAI of convergence with IFRS w.e.f. april, 2011 for Indian companies? Justify you reasons.  7+7=14
(b) Distinguish between the terms “harmonization” and “Standardisation”. Outline few suggestions that have been made by the RBI’s advisory group on accounting and auditing for financial institutions including NBFC.   4+10=14