Unit II Financial Statement Analysis

1. From the following prepare comparative statement

Particulars 2011 Rs. 2012 Rs.
Sales revenue 685000 750000
Cost of Sales 250000 285000
Payroll expense 191000 195000
Administration 63000 69000
Marketing expense 17000 21000
 Repairs and Maintenance 22,000 24,000

Solution:
Comparative Income Statement
Increase/
2011 2012 %
Particulars decrease
Sales 685000 750000 +65000 9.5
Less: Cost of Sales 250000 285000 +35000 14.0
Gross Profit 435000 465000 +30000 6.9
Operating expenses      
Pay roll expenses 191000 195000 +4000 2.1
Administration 63000 69000 +6000 9.5
Marketing expenses 17000 21000 +4000 23.5
Repairs and Maintenance 22000 24000 +2000 9.1
  293000 309000 +16000 5.5
Operating Income 142000 156000 +14000 9.9

Income Statement Format

Revenue (Sales) xxx
Less: cost of Sales xxx
Gross Profit xxx
Less: Operating Expenses xxx
Operating Profit xxx
Less: Fixed charges/ Non- operating Expenses xxx
Add: Non Operating Incomes xxx
Net Profit Before Tax xxx
Less: Income Tax xxx
Net Profit After Tax xxx

2. From the following information prepare a comparative income statement

Particulars 2010 2011
Sales 65000 80000
Cost of Sales 22000 26000
salaries and wages 5000 11000
Advertisement 3500 4000
Repairs 1000 1200
Administration 1400 1800

Solution:
Comparative Income Statement
 Increase/
2010 2011 %
Particulars decrease
Sales 65000 80000 +15000 23.08
Less: cost of Sales 22000 26000 +4000 18.18
Gross Profit 43000 54000 +11000 25.58
Operating Expenses      
salaries and wages 5000 11000 +6000 120.00
Advertisement 3500 4000 +500 14.29
Repairs 1000 1200 +200 20.00
Administration 1400 1800 +400 28.57
  10900 18000 +7100 65.14
Operating income 32100 36000 +3900 12.15
III Unit Ratio Analysis
3. From the following prepare comparative statement
Particulars 2011 Rs. 2012 Rs.

Sales revenue 685000 750000

Cost of Sales 250000 285000

Payroll expense 191000 195000

Administration 63000 69000

 Marketing expense 17000 21000

Repairs and Maintenance 22,000 24,000

Solution:
Comparative Income Statement
Increase/
2011 2012 %
Particulars decrease
Sales 685000 750000 +65000 9.5
Less: Cost of Sales 250000 285000 +35000 14.0
Gross Profit 435000 465000 +30000 6.9
Operating expenses      
Pay roll expenses 191000 195000 +4000 2.1
Administration 63000 69000 +6000 9.5
Marketing expenses 17000 21000 +4000 23.5
Repairs and Maintenance 22000 24000 +2000 9.1
  293000 309000 +16000 5.5
Operating Income 142000 156000 +14000 9.9

4. From the following information prepare a comparative income statement

Particulars 2010 2011
Sales 65000 80000
Cost of Sales 22000 26000
salaries and wages 5000 11000
Advertisement 3500 4000
Repairs 1000 1200
Administration 1400 1800

Solution:
Comparative Income Statement
Increase/
2010 2011 %
Particulars decrease
Sales 65000 80000 +15000 23.08
Less: cost of Sales 22000 26000 +4000 18.18
Gross Profit 43000 54000 +11000 25.58
Operating Expenses      
salaries and wages 5000 11000 +6000 120.00
Advertisement 3500 4000 +500 14.29
Repairs 1000 1200 +200 20.00
Administration 1400 1800 +400 28.57
  10900 18000 +7100 65.14
Operating income 32100 36000 +3900 12.15
Unit IV Fund Flow Statement and Cash Flow Statement

Sol

Changes in working Capital

Particulars 2010 2011 Increase Decrease

Current Assets

Cash 30000 47000 17000

Debtors 120000 115000 5000

Stock in trade 80000 90000 10000

Total Current Assets 230000 252000

Current Liabilities

Trade Creditors 10000 23000 13000

Total Current Liabilities 10000 23000

Working capital = Current assets- current liabilities 220000 229000 9000

1.
From the following, calculate fund from operation
Goodwill written off Rs. 10,000
Preliminary expenses written off Rs.5000
Net profit for the year Rs.16,000
General reserve provided Rs.6000
Profit on sale of machinery Rs.2000
Dividend paid Rs.14,000

Solution:

Net Profit   16000

Add: Non operating expenses    
Goodwill written off 10000  
Preliminary expense written off 5000  
General reserve 6000  
Dividend paid 14000 35000
    51000
Less: Non operating Income    
Profit on sale of machinery 2000 2000
Funds from operation   49000

2. Peerless Ltd is engaged in customer retailing. You are required to forecast their working
capital requirements from the following information:
Project annual sales Rs.65000
% of Net profit to cost of sales 25%
Average credit allowed to debtors 10 weeks
Average credit allowed to creditors 4 weeks
Average stock carrying (in terms of sales requirements) 8 weeks
Add 20% to allow for contingencies.

3. Calculate Cash from Operation from the following particulars

Net profit for the year Rs.20,000
Total Sales Rs, 40,000
Debtors outstanding at the end of the accounting year Rs.10,000
4. Prepare Funds Flow Statements
Balance sheet

Liabilities 2011 (Rs.) 2012 (Rs.) Assets 2011 (Rs.) 2012 (Rs.)

Share Capital 1,50,000 1,87,500 Machinery 35000 50000

Creditors 53,000 35,000 Stock 60500 68000
Profit and Loss 7,000 15,500 Debtors 90500 85000
a/c Cash 24000 35000

Total 2,10,000 2,38,000 2,10,000 2,38,000

Statement of changes in working capital
Particulars 2011
Fund Flow2012StatementIncrease
Decrease
Current Assets   Source   Rs  
Application Rs
Stock 60500 68000
Share capital 7500  
37500
Machinery 15000
Debtors 90500
Profit and 85000
Loss a/c   8500 5500 in Working capital
Increase 31000
Cash 24000
  35000 11000  
46000 46000
A 175000 188000    
Current Liabilities       5. The
Creditors B 53000 35000 18000   following
Working capital (A- B) 122000 153000   31000 is the
      36500 36500
Comparative Balance sheet of Preethi and Co.Ltd as on 30th June 1987 and 30th June 1988
Liabilities 30.6.19 30.6.1988 Assets 30.6.1987 30.6.1988
87

Share capital 180000 200000 Goodwill 24000 20000

Reserve Fund 28000 36000 Building 80000 72000
P & L a/c 39000 24000 Machinery 74000 72000
Trade Creditors 16000 10800 Investments 20000 22000
Bank Overdraft 12400 2600 Inventories 60000 50000
Provision for Taxation 32000 34000 Debtors 40000 44400
Provision for Doubtful 3800 4200 Cash 13200 30400
Debts

311200 311600 311200 311600

i)
ii)
iii) Rs.15,000 interim dividend paid during January 1988.
iv) Taxes paid during the year Rs. 30,000.
Prepare i) A statement of changes in working capital
ii) A fund Flow Statement.

6. From the following information prepare statement showing changes in working capital
Liabilities 2001Rs 2002 Rs
Equity share capital 120000 120000
Preference share capital -------- 48,000
Sundry Creditors 75000 82,560
Bank Overdraft -------- 9600

Assets
Plant and Machinery 83000 115000
Land and building 32000 130000
Closing Stock 81600 67200
Sundry Debtors 48000 38400
Bank Balance 224000 -------

Sol.
Statement of Changes in working capital
Effect on working
Particulars 31.3.2001 31.3.2002 capital
Increase Decrease
A) Current Assets      
Closing Stock 81600 67200 14400
Sundry Debtors 48000 38400 9600
Bank Balance 22400 --- 22400
Total (A) 152000 105600  
B) Current Liabilities      
Sundry Creditors 75000 82560 7560
Bank overdraft -- 9600 9600
Working capital ( A-B) 77000 13440 63560  
63560 63560

7. From the following Balance sheets of silver enterprise Ltd. Prepare a schedule of changes in
working capital and a statement of flow of funds for the year ended 31 March 2002:
Liabilities 31.3.01 31.3.02 Assets 31.3.01 31.3.02

Share capital 200000 212500 Hotel Premises 125000 125000

General 36250 61250 Kitchen 60000 85000
Reserves -- 12500 Equipment 10000 22500
Secured Loan 22500 12500 Cash in Hand 41250 48750
Sundry Sundry Debtors 22500 17500
Creditors Closing Stock

258750 298750 258750 298750

Sol
Statement of changes in working capital for the year ended 31st March 2002
 Effect on Working
Capital
Particulars 31.3.01 31.3.2002 Increase Decrease
A) Current assets      
Cash in hand &
Bank 10000 22500 12500  
Sundry debtors 41250 48750 7500  
Closing Stock 22500 17500   5000
Total ( A) 73750 88750    
B) Current
liabilities      
Sundry Creditors 22500 12500 10000  
Total (B) 22500 12500    
Working Capital
( A-B) 51250 76250    
30000 30000

Statement of sources & application of funds for the year ended 31st March
2002
Sources Rs. Application Rs.
Fresh issue of equity shares 12500 Kitchen equipment purchased 25000
Profit for the year 25000 Increase in working capital 25000
Secured loan raised 12500  
  50000   50000

8. From the following balance sheet of Raja, prepare a schedule of change in working
capital and statement of flow of funds for the year ended 31st March 2000.
Liabilities 1999 2000
Share capital 500000 555000
Reserve 110000 114000
Loan 8000 20000
Creditors 116000 45000
Total 734000 734000
Assets 1999 2000
Land 320000 320000
Cash 210000 214000
Debtors 104000 120000
Stock 100000 80000
Total 734000 734000

Statement of changes in working capital

Working Capital
 Particulars 1999 2000 Increase Decrease
Current Assets      
Cash 210000 214000 4000  
Debtors 104000 120000 16000  
Stocks 100000 80000   20000
A 414000 414000    
Current Liabilities      
Creditors B 116000 45000 71000  
Working capital (A-B) 298000 369000   71000
      91000 91000

Fund Flow Statement

Source Rs Application Rs
Share Capital 55000  
Reserve 4000  
Loan 12000 Increase in WC 71000
  71000   71000

9. From the information prepare statement of changes in Working capital

  2011 2012
Share capital 120000 168000
Creditors 35000 41000
Bank overdraft _ 4500
Furniture 41000 60000
Machinery 16000 65000
closing stock 40000 32000
sundry Debtors 34000 17000
Cash 1000 _

Statement of changes in Working capital

Particulars 2011 2012 Increase Decrease
Current assets        
Closing stock 40000 32000   8000
Sundry Debtors 34000 17000   17000
Cash 1000     1000
(A) 75000 49000    
Current Liabilities        
Creditors 35000 41000   6000
Bank over draft   4500   4500
(B) 35000 45500    
Working Capital( A-B) 40000 3500 36500  
      36500 36500