Finance and Accounts

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Khushabu

Khushabu (Querist)
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18 December 2009 how to analyse the balance sheet and P&L?

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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18 December 2009 Take two year's figure of b/s and pnl i.e. previous year and current year.

Check the differences.

If a particular item in pnl was shown in previous year and in current year that figure is not shown; it means it requires attention.

Regarding income part; apply Gross Profit Ratio and Net Profit Ratio.

If GP is down without any variation in prices; most probably it means valuation of closing stock is wrong.

There should be change in balance sheet according to the financial performance.

If debtors are increasing; check the age of debtor. It might be that some debtors which are outstanding for a long time; are actually bad.

Practice a lot on different published balance sheets of listed companies.

CA Rakhecha,Surat