Financial Accounting & Analysis
Q1. From the following information of A star Ltd. prepare the Cash Flow statement for the year ended 2017 and 2018 as per AS – 3.
| Liabilities | 31-3-2017 | 31-3-2018 | Assets | 31-3-2017 | 31-3-2018 |
| Equity share capital | 220,000 | 250,000 | Machinery | 200,000 | 230,000 |
| 9% Preference Share Capital | 100,000 | 110,000 | Building | 150,000 | 176,000 |
| Securities Premium | 20,000 | 26,000 | Land | 18,000 | 18,000 |
| Profit & Loss A/c | 104,000 | 134,000 | Stock | 84,000 | 98,000 |
| 5% Debentures | 70,000 | 64,000 | Debtors | 38,000 | 38,000 |
| Creditors | 38,000 | 46,000 | Bills Receivable | 42,000 | 62,000 |
| Bills Payable | 5,000 | 4,000 | Cash | 42,000 | 32,000 |
| Provision for Tax | 10,000 | 12,000 | |||
| Dividends payable | 7,000 | 8,000 | |||
| 574,000 | 654,000 | 574,000 | 654,000 |
Q2. Balance Sheet for JK Ltd. for the year ended 31st March 2016 & 2017
| Liabilities | 2016 | 2017 | Assets | 2016 | 2017 |
| Equity Share Capital | 200,000 | 200,000 | Land | 50,000 | 50,000 |
| 9% Preference Share Capital | 150,000 | 150,000 | Building | 150,000 | 135,000 |
| Reserves | 100,000 | 122,500 | Plant & Machinery | 150,000 | 135,000 |
| 17% Debentures | 50,000 | 75,000 | Furniture | 50,000 | 70,000 |
| Creditors | 75,000 | 100,000 | Stock | 100,000 | 150,000 |
| Bills Payable | 25,000 | 37,500 | Debtors | 100,000 | 150,000 |
| Tax payable | 50,000 | 75,000 | Cash | 50,000 | 70,000 |
| 650000 | 760000 | 650000 | 760000 |
Profit & Loss Account for JK Ltd. for the year ended 31st March 2016 and 2017
| Particulars | 2016 | 2017 | Particulars | 2016 | 2017 |
| To Cost of goods sold | 300,000 | 375,000 | By Sales | 400,000 | 500,000 |
| To Operating Expenses | |||||
| Administrative | 6,500 | 7,250 | |||
| Selling | 10,000 | 10,000 | |||
| To Interest on Debentures | 8,500 | 12,750 | |||
| To Net Profit | 75,000 | 95,000 | |||
| 400,000 | 500,000 | 400,000 | 500,000 |
Using the tool of commonsize financial statement analysis, comment about the improvement or decline of financial performance of the company.
Q3. The following extracts are available from the financial statements of companies V ltd. and J Ltd. for the year ended 31st March 2017: (Rs. In Lakhs)
| Particulars | V Ltd. | J Ltd. |
| Revenue from operations | 1,500 | 6,000 |
| Manufacturing cost | 900 | 4,050 |
| Interest paid | 105 | 375 |
| Depreciation | 135 | 675 |
| Selling expenses | 135 | 225 |
| Income Tax | 90 | 225 |
| Non-operating income | 45 | 285 |
| Dividend paid | 120 | 600 |
| Fixed Assets | 1,500 | 7,350 |
| Current Assets | 525 | 2,250 |
| Current Liabilities | 375 | 2100 |
| Debentures | 600 | 3,300 |
| Reserves | 450 | 1,200 |
| Share Capital | 600 | 3,000 |
From the above information answer the following questions with the help of suitable ratios:
3 a)
- Which company has better solvency using current ratio and share value using earning per share?
- Which company would you recommend for investment? Justify.
3 b)
- Which company has efficiently employed capital using return on capital employed and better operational efficiency using operating profit ratio?
- Which company would you recommend for investment? Justify.