Get premium membership and access revision papers, questions with answers as well as video lessons.
Got a question or eager to learn? Discover limitless learning on WhatsApp now -
Start Now!
Financial Statement Analysis Question Paper
Financial Statement Analysis
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2009
Page 1 of 3
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 407: FINANCIAL STATEMENT ANALYSIS
DATE: THURSDAY 13TH AUGUST 2009 TIME: 8.00 A.M. – 10.00 A.M.
INSTRUCTIONS:
Answer ALL Questions
Q.1 a) Briefly explain the important of cash flow statement to a business entity.
(10 marks)
b) Explain the impact of inflation on financial statements. (10 marks)
c) Financial analysis is a process by which an accountant or other interested
parties identifies the financial strength or position of a company. Account for
‘other interested parties’ to financial statement information. (10 marks)
Q.2 a) The following information was extracted from the books of Koni Company
Limited. It is financed partly by ordinary share capital of 200,000 share at
10/- selling at 255 in the stock exchange. This company reported a profit of
kshs. 1 M before tax and intends to declare a dividend on its 600,000
preference shares and 30% dividend on its ordinary shares. Tax rate is 50%.
Required
i) EPS (2 marks)
ii) E.Y (2 marks)
iii) P/E (2 marks)
iv) Gearing Ratio (2 marks)
v) Return on capital employed (2 marks)
Page 2 of 3
b) Write brief notes on the following concept as used in financial statement
analysis. (2 marks)
i) Financial liabilities and operating liabilities. (2 marks)
ii) Current liabilities and non current liabilities. (3 marks)
Q.3 You are given below in summarized form, the accounts of Algeron, a Limited
company for 20x6 and 20x7
20 x 6 20 x 7
Balance sheet balance sheet
Cost dep’n & nb$ cost & Depn’s NBV $
Plant 10,000 (4,000) 6,000 11,000 (5,000) 6,000
Buildings 5,000 10,000 4,000 90,000 11,000 79,000
Investment At Cost 46,000 85,000
Land 50,000 80,000
Inventory 43,000 63,000
Receivable 40,000 50,000
Bank 3,000
237,000 343,000
Ordinary shares of 1$ each 40,000 50,000
Share Premium 12,000 14,000
Revaluation reserve (land) - 20,000
Accumulated profit 45,000 45,000
10% loan notes 100,000 15,000
Payables 40,000 60,000
Bank - - 4,000
Page 3 of 3
INCOME STATEMENT
20 x 6 $ 20 x 7 $
Sales 200,000 200,000
G.P 100,000 80,000
Expenses 50,000 47,000
Earning before interest and tax 50,000 33,000
Interest 10,000 13,000
Net profit for the year 40,000 20,000
Dividends for the year (paid after the) 20,000 20,000
(Balance sheet)
You are required:
To prepare a cash flow statement for the Algeron for 20 x 7 to explain as far as
possible the movement in the bank balance.
Using the summarized accounts given and the statement you have just prepared,
comment on the position, progress and direction of Algernon. (15 marks)
Q.4 a) A lease is classified as capital lease if at its inception,
the lease meets any of certain criteria. Discuss. (8 marks)
b) Auditors are one source of assurance in identification and measurement of
liabilities. What are the important features used in analyzing liabilities?
(7 marks)
More Question Papers
Popular Exams
Return to Question Papers