Page 39 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes 1,00,000 1,20,000

(–) Operating expenses 10,000 10,000
Net profit 90,000 1,10,000
Solution:

Particulars 2004 (`) 2005 (`) Absolute % Increase % Decrease
Change (`)
Sales 2,00,000 2,50,000 50,000 25 -
(–) Cost of goods sold 1,00,000 1,30,000 30,000 30 -
1,00,000 1,20,000 20,000 20 -
(–) Operating expenses 10,000 10,000 N.C - -
Net profit 90,000 1,10,000 20,000 22.22
From the above table, the following inferences can be had:
1. The firm has registered 25% increase in sales from the year 2004 to 2005.
2. Cost of goods sold raised 30% from the year 2004 to 2005.

3. There is no change in the level of operating expenses.
4. The firm has got 22.22% increase in the level of net profits from the year 2004 to 2005.

Self Assessment

Choose the appropriate answer
9. Financial statement analysis is to

(i) Inter firm comparison
(ii) Intra firm comparison
(iii) Industrial average comparison
(iv) (i), (ii) & (iii)
10. Comparative financial statement analysis is into
(i) Comparison of income and position statements

(ii) Common size statements
(iii) Trend percentage analysis
(iv) (i), (ii) & (iii)
11. Main objectives of the financial statements analysis is

(i) To study the changes in the financial performance
(ii) To study the liquidity, solvency of the firm
(iii) To undergo financial planning based upon the yester financial performance
(iv) (i), (ii) & (iii)
State whether the following statements are true or false:

12. Comparability between enterprises is more difficult to obtain than comparability within a
single enterprise.

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