Financial Statement Analysis: Comparative Income Statement Objectives

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What is the main objective of a Comparative Income Statement?

Analyze and evaluate the operating results of a business (correct)

List all expenses incurred by the business

Facilitate the management of cash flow

Predict future sales accurately

How can an increase in sales affect profitability according to the text?

Guarantee improved operational efficiency

Always lead to increased profits

Automatically reduce costs

May not necessarily increase profits (correct)

In the context of a Comparative Income Statement, what should be studied in the first step?

Net profit

Taxes paid

Gross profit (correct)

Operating expenses

Which type of expenses should be deducted from gross profit to find operating profits?

Cost of goods sold Signup and view all the answers

What will result in an increase in operating profit according to the text?

Increase in sales and efficient management of expenses Signup and view all the answers

What does a Comparative Income Statement aim to help management with?

Forecasting future profits Signup and view all the answers

What does an interpreter look at to check the profitability of a concern?

Increase or decrease in retained earnings Signup and view all the answers

According to the guidelines for interpreting a Common Size Income Statement, what should be studied first?

Gross profit ratio Signup and view all the answers

What can be shown as percentages of sales in a Common Size Income Statement?

Items in the income statement Signup and view all the answers

How can the profitability improve according to Common Size Income Statement guidelines?

By having an increase in sales more than cost of goods sold Signup and view all the answers

What is one significance of showing items in the income statement as percentages of sales?

Evaluating operating activities of the enterprise Signup and view all the answers

Which statement should be analyzed first according to the guidelines for interpretation of a Common Size Income Statement?

Gross profit ratio Signup and view all the answers

What is the total Revenue for the year 2014 based on the provided information?

₹22,40,000 Signup and view all the answers

What was the Profit Before Tax for the year 2013?

₹2,70,000 Signup and view all the answers

How is Working Capital calculated?

Current Asset - Current liabilities Signup and view all the answers

What financial aspect can be inferred from an increase in Working Capital?

Improvement in current financial position Signup and view all the answers

How should an increase in fixed assets be financed?

By issuing long-term securities or fresh share capital Signup and view all the answers

In the Balance Sheet analysis, what does an increase in long-term loans indicate?

Potential expansion or investment in fixed assets Signup and view all the answers

Why has the gross profit ratio improved in 2014 according to the text?

The company reduced the cost of goods sold. Signup and view all the answers

What action by the company helped increase the operating profit according to the text?

Reducing operational expenses. Signup and view all the answers

How much did the net profit ratio increase from 2013 to 2014 according to the text?

Increased by 9.82%. Signup and view all the answers

What helped improve the profitability of the company in 2014 according to the text?

Control and reduction of operating costs. Signup and view all the answers

What does common-size income statement analysis involve?

Presenting each item as a percentage of a common figure. Signup and view all the answers

Why is percentage analysis used in balance sheets according to the text?

To facilitate easy comparison of items. Signup and view all the answers

What does the trend analysis reveal about fixed assets from 2016 to 2019?

The proportion of investment in fixed assets is decreasing. Signup and view all the answers

According to the trend analysis, what can be inferred about the investment in current assets?

It is increasing year after year. Signup and view all the answers

How have the total assets changed from 2016 to 2019 according to the trend analysis?

They have been increasing every year. Signup and view all the answers

What conclusion can be drawn about the asset structure based on the trend analysis?

It is becoming less diversified. Signup and view all the answers

Which trend percentage indicates a decrease relative to the base year of 2016?

140% total assets for 2018 Signup and view all the answers