HBC 2303: FINANCIAL STATEMENT ANALYSIS Past Paper

W1-2-60-1-6

JOMO KENYATTA UNIVERSITY

OF

AGRICULTURE AND TECHNOLOGY

University Examinations 2014/2015

END OF SEMESTER EXAMINATION FOR

THE DEGREE OF BACHELOR OF COMMERCE

HBC 2303:  FINANCIAL STATEMENT ANALYSIS

DATE:  AUGUST 2014                                                                                     TIME: 2 HOURS

INSTRUCTIONS:   ANSWER QUESTION ONE (COMPULSORY) AND ANY OTHER TWO QUESTIONS

 

Question One (30 Marks)

 

  • a) Discuss any four sources of financial statement analysis information, indicating which type of information is got from each of them. (8 Marks)
  • b) Discuss five users of financial statement analysis information and indicate the specific type of information they need. (10 Marks)
  • c) Discuss four limitations of using ratio analysis as a tool of financial statement analysis.                                                                                                             (8 Marks)
  • d) Discuss the steps in formulating a financial plan. (4 Marks)

Question Two (20 Marks)

  • a) The following are the comparative financial statement of MK Ltd:

Income Statement:

Details 2009 2008
Net sales 5,200,000 4,800,000
Cost of sales (3,600,000) (3,150,000)
Gross profit 1,600,000 1,650,000
Expenses (operating) (1,280,600) (1,260,000)
Income before interest expense 319,400 390,000
Interest (64,000) (70,000)
Income before tax 255,400 320,000
Tax (30%) (76,620) (96,000)
Income after tax 178,780 224,000

 

 

Balance sheet 2009 2008
Non current assets    
Land 40,000 40,000
Buildings 120,000 85,000
Currents assets    
Stock 80,000 100,000
Debtors 60,000 40,000
Cash 12,000 23,500
Prepaid expenses 3,000 1,200
Total assets 315,000 289,700
     
Capital liabilities:    
Capital 90,000 90,000
Retained earnings 80,000 69,700
8% bonds 75,000 80,000
     
Current liabilities:    
Creditors 67,000 44,000
Notes payable 3,000 6,000
Total capital and liabilities 315,000 289,700

 

Required:

Analyze the above financial statements horizontally giving a detailed explanation of your results.                                                                                                             (20 Marks)

Question Three (20 Marks)

The balance sheet of Grand Limited, a wholesaler at 31/12/2005 and 2006 were as follows:

 

  2005 2006
  ‘000’ ‘000’ ‘000’ ‘000’
Fixed assets 126,300   162,400  
Depreciation (50,000) 76,300 (64,000) 98,400
         
Current assets        
Stock 12,000   15,000  
Debtors 10,500   14,000  
Cash 1,400   2,000  
  23,900   31,000  
         
Current liabilities        
Creditors 6,800   9,400  
Corporation tax 3,400   5,000  
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