Class 12th Accountancy 2017 Set1 Delhi Board Paper Solution

Question 20

State the objectives of ‘Analysis of Financial Statements’.

Answer

Objectives of ‘Analysis of Financial Statements’ is as follows:

1) To assess the earning capacity and profitability of the organisation.

2) To assess the efficiency of managers as well as business by calculating finanical rations and look at the trend at their variations.

3) To provide meaningful information about changes in the financial data over time via comparisions of related datas.

4) To assess the solvency position of the organisation to know the ability to pay its short term and long term debt.

5) To assess the future of the organisation by preparing budgets and forecasting.