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Hbc2105:Financial Statement Analysis Question Paper
Hbc2105:Financial Statement Analysis
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2013
QUESTION ONE (30 MARKS)
a) Every organization needs financial statement information. Explain the sources of financial information. (10 marks) b) Discuss the essential features of financial analysis. (6 marks) c) Discuss the problems associated with cross-sectional analysis. (6 marks) d) Explain the main users of financial statements and financial statements information. (8 marks) e) Discuss the main difference between cash flow statement and fund flow statement. (6 marks)
QUESTION TWO (20 MARKS)
a) Define the term Forecasting and explain its main functions. (4 marks) b) Discuss in details the steps followed in forecasting. (4 marks) c) The following information relates to sales of a manufacturing firm:
Month Sales Month Sales January 460 July 380 February 450 August 370 March 460 September 410 April 420 October 450 May 390 November 480 June 400 December 500 January 470 Required:
2
i) Using the moving average, calculate the THREE month forecast. (12 marks)
QUESTION THREE (20 MARKS)
KEMU university is expanding its services in Kenya. Accounts prepared in January 2012 included the following true information: Profit statement of the year ended 31st December
2010
2011 Sales 3,000 4,200 Less cost of goods sold 2,100 2,800 Gross profit 900 1,400 Less: Trading expenses 450 550 Trading Profit 450 850 Less: Debenture interest 25 25 Net profit before taxation 425 825 Less: Corporation Tax 160 320 Net profit after taxation 265 505 Less: Ordinary share dividend 125 175 Reserves 140 330
Balance Sheet as at 31st December :
2010
2011 Fixed Assets at cost 1,000 1,400 Less: Depreciation 200 250 800 1,150 Current Assets: Stock 400 500 Debtors 250 350 Cash 80 - 700 900 Less: Current Liabilities Creditors 145 200 Taxation 160 320 Proposed dividend 125 175 Bank Overdraft (430) 65 1,100 1,290 Sources of Capital: Ordinary share Capital authorized and issued 500 500 Undistributed profit 350 680 10% Debentures 250 110 1,100 1,290
3
Required: a) Calculate the Current Ratio as at 31st December. (2 marks) b) Calculate the Asset Turnover rate for 31st December (3 marks) c) Calculate the Return on Capital Employed. (3 marks) d) Comment on the current position. (2 marks) e) Discuss the limitations of Ratio Analysis. (10 marks)
QUESTION FOUR (20 MARKS)
Lima Limited provided the following information that relates to the organizations income statement.
Balance sheet as on June 2006 and 2007
2010
2011 Fixed Assets: Premises less Depreciation 600 570 Plant machinery less Depreciation 400 500 Furniture less depreciation 100 85 Total Fixed Assets 1,100 1,155 Investments 200 150 Current Assets: Stock 300 300 Debtors 200 150 Bank 50 60 Cash 20 18 Total Current assets 570 528 Total Assets 1,870 1,833 Liabilities: Capital 8% Preference capital 200 300 Equity Capital 500 500 Reserves 200 250 Proprietors funds 900 1,050 Secured Loans 350 200 10% Debentures - - Current Liabilities: Sundry creditors 300 350 Bills Payable 200 175 Taxes payable 120 58 Total current liabilities 620 583 Total liabilities 980 783 Total Capital and Liabilities 1,870 1,833
4
Required:
a) Prepare a common size income statement and make a brief comment. (20 marks)
QUESTION FIVE (20 MARKS)
a) Discuss the importance of time series analysis. (5 marks) b) he folloing information relates to uma’s inestment
Year Production (tonnes) Year Production (tonnes) 2001 390 2006 396 2002 381 2007 387 2003 372 2008 381 2004 405 2009 435 2005 420 20110 475
Required:
i) Find the trend value for the above time series of production by the method of moving average using 3 year period. (15 marks)
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