Question (b) (Short Questions)

1. What is the objective of financial statements analysis?

2. What is the importance of understanding the general economic environment and the industry situations in financial statements analysis?

3. Distinguish between horizontal and vertical analysis of financial statement data.

4. What is the importance of using industry or competitor data in financial statement analysis?

5. If net sales have been increasing at a reasonable rate, but net income has been declining steadily as a percentage of these sales, what appears to be the problem?

6. What is cost-volume-profit analysis?

7. What are the assumptions and limitations of cost volume profit analysis?

8. How can the breakeven and cost-volume-profit analysis help the companys management in carrying out its function?

9. Explain the significance of the margin of safety?

10. How is the high-low method used in segregating the fixed and variable components of mixed costs?

11. How will the breakeven point for multiple product line be computed?

12. What is a composite contribution margin?