Class 12 Accountancy - Company Accounts and Analysis of Financial Statements - Chapter Analysis of Financial Statement NCERT Solutions | Explain the usefulness of trend percenta
Explain the usefulness of trend percentages in interpretation of financial performance of a company.
1) Trend percentages, also referred to as index numbers, help you to compare financial information over time to a base year or period. You can calculate trend percentages by: Compute the percentages by Analysis year amount / base year amount and then multiplying the result by 100 to get a percentage.
2) Trend analysis tries to predict a trend, such as a bull market run, and ride that
trend until data suggests a trend reversal, such as a bull-to-bear market. Trend
analysis is helpful because moving with trends, and not against them, will lead to profit for an investor.
3) Trend analysis can improve your business by helping you identify areas with your organisation that are doing well, as well as areas that are not doing well. In
this way it provides valuable evidence to help inform better decision making
around your longer-term strategy as well as ways to futureproof your business.
4) Trends are an opportunity to do something new not just from an individual
standpoint, but on a macro level. Trends allow us to shift cultural currents and
ultimately depict an underlying intuition.
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State the meaning of financial statement analysis?
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(a) Inventory Turnover (b) Debtor Turnover
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The current ratio provides a better measure of overall liquidity only when a
firm’s inventory cannot easily be converted into cash. If inventory is liquid, the
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State the importance of financial statements to
(i) shareholders
(ii) creditors
(iii) government
(iv) investors - Q:-
The liquidity of a business firm is measured by its ability to satisfy itslong-
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(i) Loose tools
(ii) Uncalled liability on partly paid-up shares
(iii) Debentures redemption reserve
(iv) Mastheads and publishing titles (v) 10% debentures
(vi) Proposed dividend
(vii) Share forfeited account
(viii) Capital redemtion reserve
(ix) Mining rights
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Can a company purchase its own debentures in the open market? Explain.
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Prepare the format of balance sheet and explain the various elements of balance sheet.
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