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The financial analysis is a study of relationship among various financial figures as set out in the financial statements.

Comparative statement of profit and loss (Income statement) is the horizontal analysis of income statement which shows the operating results for more than one accounting period.

A common size Balance Sheet is a statement in which total of assets or equity and liabilities is assumed to be equal to 100 and all the figures are expressed as percentage of the total.

It is also known as EBIT, i.e. earnings before interest and taxes. It is the difference between operating income and operating expenses. All the nonoperating items (i.e. income and expenses) are ignored.

Profit and loss account shows the operating performance of an enterprise for a period of time.

True

• inancial Statements are affected from personal decision.
• Financial statements are prepared by adopting accounting concepts.

• Completion,
• Reality.

Cash or cash equivalent short-term lending and advances, expenses paid in advance, taxes paid in advance, etc. are examples of current assets.

There are two components of current ratio, i.e. current assets and current liabilities. It is calculated as the ratio of current assets to current liabilities. This ratio shows the liquidity position of the business, i.e. the ability of a company to pay off its current liabilities.

1. Historical Facts,
2. Depend on Guess
3. To Hide, Real position
4. No attention on qualitative facts.

Common size income statement means in which revenue from operation (Net sales) is taken as 100 and expenses are expressed as percentage at revenue from operation.

Correct option is (A) Income statement

Examples of cash outflows are:

• Interest paid
• Loss on sale of an asset
• Dividend paid
• Repayment of short-term borrowings.

Correct option is (C) Income statement

Examples of current liability are Sundry creditors, Bills payable, Bank overdraft, Shortterm loans, etc.

Limitations of Financial Statement Analysis : Analysis of financial statements helps the interested parties in ascertaining the strengths and weakness of an enterprise, but at the same time it suffers from certain limitations. These limitations must always be kept in mind while undertaking the analysis of financial statements.

The limitations of financial statements analysis are :
(i) Historical Analysis: Financial statement analysis is a historical analysis. It analysis what has happened till date. It does not reflect the future. Person like shareholders, investors etc. are more interested in knowing the likely position in future.

(ii) Ignore Price Level Changes: Price level changes and purchasing power of money are inversely related. A change in the price level makes analysis of financial statements of different accounting years invalid because accounting records ignore change in value of money.

(iii) Qualitative Aspect Ignored: Since the financial statements are confined to monetary matters alone, the qualitative aspects like quality of management, quality of staff, public relations are ignored while carrying out the analysis of financial statements.

(iv) Suffers from the Limitations of Financial Statements : Analysis of financial statements is based on the information given in the financial statements. Hence, this analysis suffers from all such limitations from which the financial statements suffer. Therefore, unless the basic data given in the financial statements is reliable the conclusions derived on the basis of the analysis of this data cannot be reliable.

(v) Not Free from Bias: In many situations the accountant has to make a choice out of alternatives available e.g., choice in the method of inventory valuation or choice in the method of depreciation (straight line or written down value etc.) Since the subjectivity is inherent in personal judgement the financial statements are therefore not free from bias.

(vi) Variation in Accounting Practices: From inter firm comparison it is necessary the accounting practices followed by the firms do not very significantly. As there may be variations in accounting practices followed by different firms a meaningful comparison of their financial statements is not possible.

(vii) Window Dressing: Window dressing refers to the presentation of a better financial position that what it actually is by manipulating the books of account. On account of such a situation financial analysis may give false information to the users.

(viii) Identifies Symptoms : Financial analysis identifies symptoms of the problems but does not | offer its diagnosis. The management has to look for the remedy to rectify the problems.

Cash proceeds from issue of debentures is financial activity.

Explanation: Cash proceeds from issue of debentures are classified as financial activity for the business, as it relates to arrangement of funds for the business.

• Summary,
• Show in currency.

Cash equivalents are the assets, such as marketable securities and short term investments, which are readily convertible into cash. They are regarded as highly liquid assets.

Trend analysis determines the direction upwards and downwards and involves the computation of the percentage relationship that each item bears to the same item in the base year.

The short term deposits are cash equivalent.

Explanation: Cash equivalents are those that can be converted into cash immediately. They are highly liquid in nature. For example, marketable securities, short-term deposits etc.

Examples of cash inflows are:

• Interest received
• Dividend received
• Sale of asset/investment
• Rent received.

This statement is False.

Usually, the current ratio should be 2 : 1. It means current assets are double of current liabilities. It shows the short-term solvency of business enterprises.

Correct option is (C) To know the profit and loss of the business entity

Bills payable is current liability.

Explanation: Bills payable are drawn in case of credit purchases. So, it is a liability to be paid in the near future, i.e. a short-term liability. It is generally payable within a period of 12 months, i.e. a year.

1. Understand ability : The information must be readily understandable to users of the financial statement. This means the information must be clearly presented.

2. Relevance’s : The information must be relevant to the needs of the users.

3. Reliability: The information must be free or material error and bias and not misleading. Thus, the information should faithfully represent transactions and other events.

3. Comparability : The information must be comparable to the financial information presented for other accounting period.

This statement is True.

The short-term deposits are liquid assets. It means deposits are kept for some period (usually less than one year) and they are kept with an intention to get money quickly as and when required. They are as good as cash and considered as cash equivalent.

This statement is True.

The current ratio shows the relationship between current assets and current liabilities. If the proportion of current assets is higher than current liabilities, the liquidity position of the business entity is considered good. More liquidity means more short-term solvency. From the above, it is proved that the current ratio measures the liquidity of the business.

Current assets = Debtors + Bills receivable + Stock of goods + Cash balance + Current investments + Loose tools

= 90,000 + 10,000 + 40,000 + 70,000 + 25,000 + 15,000

= ₹ 2,50,000

Current liabilities = Creditors + Bills payable + Short-term loan + Outstanding expenses + Bank overdraft

= 30,000 + 12,000 + 40,000 + 14,000 + 29,000

= ₹ 1,25,000

Current ratio = \(\frac{Current\,assets}{Current\,liabilities}\)

= \(\frac{2,50,000}{1,25,000}\)

= 2 : 1

Note: Machinery and Non-current investment are to be committed as it is not to be included in current assets.

This statement is True.

Turnover ratio is an efficiency ratio to check how efficiently a company is using different assets to extract earnings from them. Activity ratios are financial analysis tools used to measure a business’s ability to convert its assets into cash. From both these definitions, we can say that Activity ratios and Turnover ratios are the same.

Names of combined/mixed ratios are:

1. Return On Capital Employed (ROCE)

2. Return On Investment (ROI)

1. Comparative Financial Statement
2. Common Size Financial Statement
3. Trend Analysis
4. Ratio Analysis
5. Cash Flow Analysis
6. Fund Flow Analysis
7. Break Even Analysis

When financial statements are analysed by the management for their decisions, it is known as internal analysis.

Objectives of comparative statements are:

• Compare financial data at two points of time and
• Helps in deriving the meaning and conclusions regarding the changes in financial positions and operating results.

Income Statement ratios are

• Gross Profit ratio
• Net Profit ratio
• Operating Expense ratio.

When published accounts like income statements, balance sheet, report of an auditor or directors are analysed by external parties like potential investors, financial institutions, government agencies, credit rating agencies, research etc. for their investment-related decision or for any other decision , it is known as external analysis.

The components of financial statements are trading account, profit and loss account, balance sheet, cash flow statement and fund flow statement.

Profit and loss account is known as income statement.

Objects behind the preparation of financial statement are as under :

• To know the information about profit and loss of the business entity.
• To know the financial position of the business entity.
• To know the cash position of the business entity.
• To give the financial information to the parties connected with the company.

Gross profit is a result of purchase-sales financial transactions.

The answer is (A) 16 – 20

The answer is (B) Lactic Acid

(d) inter specific hybridisation

The mule is produced by breeding between male donkey and female horse (mare).

1. Forests are the living places for wild animals. Animals can get plenty of food, shelter from the shade of trees and they feel secure in the forests. 

2. People are so greedy that they cut down the forest areas for logging of wood, to increase agriculture, and for human habitations. 

3. They clear the forests to construct, thermal power stations, industries and many buildings which leads to destruction of forests. 

4. Due to deforestation, nowadays the animals like leopard and bears, lost their food and shelter, to satisfy their hunger and to keep themselves alive, they intruding into our living places. 

5. To escape from hunters and from climatic conditions because of deforestation, is may be one more reason, for the animals coming into our living places.

 It is a measure for secondary treatment of sewage water. In this measure sludge is used which contain bacteria & algae.

Bioactive molecules are those organic compounds which are produced on commercial scale by the microbes and are useful in the human welfare. 

Cyclosporin A - produced by fungus 

Statins - produced by yeast.

Trichoderma fungus is effective bio control agents of several Plants Pathogens.

• The drinking water at a high attitude is without dissolved iodine. 
• Moreover, there is a lack of aquatic food at hills which is a good source of iodine.

• The drinking water at high attitude is without dissolved iodine. 
• Moreover, there is a lack of aquatic food at hills which is a good source of iodine.