impact on the profit margin or turn over ratios.

Similarly any decision affecting amount andratio or debt or equity used will affect the financial structure and the overall cost of capital of a company. Therefore these financial concepts are very important to evaluate as every business is competing for limited capital resources. Understanding the inter relationshipsamong the various ratios such as turnover ratios, leverage and profitability ratios helpscompanies to put their money areas where the risk adjusted return is the maximum.5) What is meant by Financial Analysis?Ans: The term financial analysis refers to the process of determining financial strengths andweaknesses of the firm by establishing strategic relationship between the items of the balancesheet, P & L Account and other operative data.6) What is External & Internal Analysis?Ans: External Analysis: If the analysis is based on the published statements i.e. P&L Accountand Balance Sheet, then such analysis is called external analysis. Generally this analysis isdone by the investors, creditors and sometime by the government.Internal Analysis: The analysis conducted by the persons who have access to the internalaccounting records of the business firm is known as internal analysis.7) What is Horizontal Analysis?Ans: Horizontal analysis refers to the comparison of the financial data of a company for several years. The figures for this type of analysis are presented horizontally over a number of columns and the figures of various years are compared with the standard or the base year.8) What is Vertical Analysis?Ans: Vertical Analysis refers to the study of relationship of various items in financialstatements of one accounting period.9) What is Ratio Analysis?Ans: Ratio Analysis concentrates on the inter relationship among the figures appearing in thefinancial statements. It evaluates the financial position of the firm by interpreting thefinancial statements.10) What is a Key Factor?Ans: A key factor is a significant resource in the manufacture of the product. Normally it islimited in supply and hence it is put to maximum use.11) What is R.O.I?Ans: R.O.I or Return on Investment is the relationship between net profits (after interest &tax) and the proprietors funds.Thus, the Return on shareholders investment = Net Profit (After interest and tax) divided by Shareholders Funds. This ratio is one of the important ratios used for measuring the overall efficiency of thefirm. As the primary objective of the business is to maximize the earnings, this ratio indicatesthe extent to which this primary objective is achieved.12) How is E.P.S Calculated?Ans: E.P.S or earnings per share is calculated by dividing the Profits available for equityshare holders with the number of equity shares13) What is Material Price Variance?Ans: Material Price Variance occurs when the raw materials are purchased at a price differentfrom the standard price.14) Mention various types of Variance?Ans: The different types of variance are:a) Direct Materials variance. b) Direct Labor Variance.c) Overheads Cost Variance.d) Sales or Profit Variance.15) What is Job Costing?Ans: Job costing is a Costing Method applied to determine the cost of specific jobs or lot of production generally manufactured according to the customers specification. The mainfeature of the job order costing is that no two orders are necessarily alike and all orders donot pass through the same manufacturing process.16) What is Cost Centre?Ans: A cost centre is a department or a part of the department or item of equipment or machinery or a person or a group of persons in respect of which costs are accumulated andone where

control can be exercised. A cost centre relating to a person is called personal costcentre and a cost centre relating to products and equipments is called impersonal cost centre.17) What is Absorption Costing?Ans: Absorption Costing is a Costing technique in which all manufacturing costs, variableand fixed are considered as costs of production and are used in determining the cost of goodsmanufactured and inventories.18) What is target costing? Ans: Target costing is a cost control technique that lays down the maximum amount that a particular product should cost. This cost is determined by deducting a required profit marginfrom the price that the product is expected to sell at a competitive market.19) What are the branches of accounting?Ans: Accounting has 3 main branches: a) Financial Accounting: It has been defined as the art of recording, classifying andsummarizing in a significant manner the events which are of a financial character in part atleast. b) Cost Accounting: It classifies, records, presents and interprets in a significant manner thematerial, overhead and labor costs involved in manufacturing and selling each product or rendering a service.c) Management Accounting: It is concerned with the data collection from internal andexternal sources, analysis, processing, interpreting and communicating the information for use within the organization so that management can more effectively plan, make decisionsand control operations.20) What is Trial balance?Ans: Trial balance is a statement containing all the balances of all the ledger accounts as atany given date, arranged in the form of debit and credit columns placed side by side and prepared with the objective of checking the arithmetical accuracy of ledger posting.The advantages of trial balance are:a) It helps in the preparation of final accounts. b) It helps to rectify the errors before preparing for final accounts.c) It is a check of accuracy for the books of accounts.21) What are accounting standards?Ans: Accounting standards may be defined as written statements issued time to time byinstitutions of accounting profession. Accounting standards deal mainly with the financialmeasurements and disclosures used in producing a set of fairly presented financialstatements. They also draw boundaries within which acceptable conduct lies and they aresimilar in nature to the laws.22) What is GAAP?Ans: Generally Accepted Accounting Principles or GAAP are a set of accounting principlesthat are followed in presenting financial information. GAAP provides certain guidelines or standards in accounting and reporting information. These guidelines are very necessary because people rely on financial information and take it to be free from bias andinconsistencies