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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:2012
QUESTION ONE (25 MARKS)
a. Briefly explain the users of accounting information. (6 Marks) b. Financial statements basically give the accounting picture of the firms operations and financial position. Explain the main objectives of financial statements. (6 Marks) c. Briefly explain the importance of ratio analysis I financial analysis (6 Marks) d. Briefly explain the problems associated with cross sectional analysis (10 Marks) e. Explain the imitations of comparative financial statements. (2 Marks)
QUESTION TWO (20 MARKS)
a. Highlight the importance of time series (5 Marks) b. The following information relates to Baba Co Ltd income statements as at 31th December 2010.
PARTICULARS 2008 2009 2010 Net sales 830,000 660,000 580,000 Cost of goodwill 450,000 352,000 254,000 Gross profit 200,000 148,000 86,000 Operating expenses 136,000 79, 000 54,000 Net operating profit 74,000 79, 000 42,100 Interest expenses 8,000 45,000 35,000 Profit before tax 88,000 65,000 59,000 Provision for taxes 55,000 65,000 44,000 Profit after tax 63,000 60,000 45,000
2
Required:
Prepare a common size income statement and make a brief comment (15 Marks)
QUESTION THREE (20 MARKS)
a. Define the term financial distress and their causes (6 Marks) b. Briefly discuss the interested parties in predicting financial distress (7 Marks) c. Explain the cost of financial distress (7 Marks)
QUESTION FOUR (20 MARKS)
a. Describe this term forecasting and state its objectives (10 Marks) b. Explain the types of forecast and parties that make use of financial forecast (10 Marks)
QUESTION FIVE (20 MARKS) WZY Ltd provided the following financial statements of profits for the year ended 31st December 2010.
Ksh.(000)
Sales 6,000
Less cost of goods sold 4,200
1,800
Less interests 240
Less 50% taxation 780
780
Dividends declared on equity shares 230,000
Balance sheets.
2009 210 2009 2010
Cash 300 240 3,000 3,000
Debtors 480 600 retained earrings702 1,278
Investments 300 480 10% debentures 2,400 2,400
Stocks 2,760 3,240 liabilities 960 1,200
3
Prepaid expenses 42 18
Fixed assets 4,518 4,578
From the information calculate:
i. Liquidity ratio (5 Marks)
ii. Solvency ratio (5 Marks) iii. Profitability ratio (5 Marks) iv. Activity ratio (5 Marks)
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