Q1. From how many years you have been working in your organization?

Less than 2 Years

20%

2 to less than 4 Years

40%

4 to less than 6 Years

30%

More than 6 Years

10%

45%

40%

40%
35%

30%

30%
25%
20%

20%

15%

10%

10%
5%
0%
Less than 2
Years

2 to less than 44 to less than 6 More than 6

Years
Years
Years

Interpretation
40% respondents replied that they are working in the organization from 2 to less
than 4 years but 30% respondents replied that they are working in the
organization from 4 to less than 6 years.

Q2. What types of financial statement are used in financial statement analysis?

Balance sheet: also referred to as satement of financial position or condition, reports

on a company's assets, liabilities, and Ownership equity at a given point in time.

Income statement: also referred to as Profit and Loss statement (or a ''P&L''), reports
on a company's income, expenses, and profits over a period of time. Profit & Loss
account provide information on the operation of the enterprise. These include sale and
the various expenses incurred during the processing state.

Statement of retained earnings: explains the changes in a company's retained

earnings over the reporting period.

Statement of cash flows: reports on a company's cash flow activities, particularly its
operating, investing and financing activities.

Interpretation
For large corporations, these statements are often complex and may include an extensive set
of notes to the financial statements and management discussion and analysis. The notes
typically describe each item on the balance sheet, income statement and cash flow statement
in further detail. Notes to financial statements are considered an integral part of the financial
statement

Q3. Financial analysis is widely used to summarize the information in a company's

financial statements in assessing its financial health

Strongly Agree

35%

Agree

45%

Neutral

5%

Disagree

12%

Strongly Disagree

3%

Interpretation
45% respondents are agree with this statement but 12% respondents are disagree with this
statement

Q4. Both the company's profitability (as measured in terms of profit margin) and
efficiency (as measured in terms of asset turnover) determine its ROA. This ROA

Strongly Agree

30%

Agree

55%

Neutral

5%

Disagree

8%

Strongly Disagree

2%

Interpretation
30% respondents are strongly agree with this statement but 8% respondents are disagree with
this statement
Q5. The changes in the company's ROE are to be noted and explained through its profit
margin, asset turnover, and equity multiplier over time

Strongly Agree

29%

Agree

49%

Neutral

13%

Disagree

8%

Strongly Disagree

1%

Interpretation
29% respondents are strongly agree with this statement but 8% respondents are disagree with
this statement

.
Q6. Debt ratios show the extent to which a firm is relying on debt to finance its
investments and operations, and how well it can manage the debt obligation

Strongly Agree

31%

Agree

52%

Neutral

10%

Disagree

6%

Strongly Disagree

1%

Interpretation
31% respondents are strongly agree with this statement but 6% respondents are disagree with
this statement

Q7. What are the limitations in case of analyzing the financial statement?
1. There is considerable subjectivity involved, as there is no correct number for the various
ratios. Further, it is hard to reach a definite conclusion when some of the ratios are favorable
and some are unfavorable.
2. Ratios may not be strictly comparable for different firms due to a variety of factors such
as different accounting practices or different fiscal year periods. Furthermore, if a firm is
engaged in diverse product lines, it may be difficult to identify the industry category to which
the firm belongs. Also, just because a specific ratio is better than the average does not
necessarily mean that the company is doing well; it is quite possible rest of the industry is
doing very poorly.
3. Ratios are based on financial statements that reflect the past and not the future. Unless
the ratios are stable, it may be difficult to make reasonable projections about future
trends. Furthermore, financial statements such as the balance sheet indicate the picture at
one point in time, and thus may not be representative of longer periods.
4. Financial statements provide an assessment of the costs and not value. For example, fixed
assets are usually shown on the balance sheet as the cost of the assets less their accumulated
depreciation, which may not reflect the actual current market value of those assets.
5. Financial statements do not include all items. For example, it is hard to put a value on
human capital (such as management expertise). And recent accounting scandals have brought
light to the extent of financing that may occur off the balance sheet.

Q8. What are the different purposes of doing the financial statement analysis?

Owners and managers require financial statements to make important business

decisions that affect its continued operations. Financial analysis is then performed on
these statements to provide management with a more detailed understanding of the
figures. These statements are also used as part of management's annual report to the
stockholders.

Employees also need these reports in making collective bargaining agreements (CBA)
with the management, in the case of labor unions or for individuals in discussing their
compensation, promotion and rankings.

Prospective investors make use of financial statements to assess the viability of

investing in a business. Financial analyses are often used by investors and are
prepared by professionals (financial analysts), thus providing them with the basis for
making investment decisions.

Financial institutions (banks and other lending companies) use them to decide
whether to grant a company with fresh working capital or extend debt securities (such
as a long-term bank loan or debentures) to finance expansion and other significant
expenditures.

Government entities (tax authorities) need financial statements to ascertain the

propriety and accuracy of taxes and other duties declared and paid by a company.

Vendors who extend credit to a business require financial statements to assess the
credit worthiness of the business.