Objectives To understand financial statements. To recognize and extract meaningful information from the raw data of financial statements. Question Fahad stitching unit has a financial year of 360 days ending on 31st December 2014. Firm makes 100% sales on credit. Shareholders want to know where firm’s profitability stands in the market but firm is not in the position to issue extensive financial information to the users. Following data containing ratios is provided to the shareholders. Required 1. Some shareholders have raised objection that given information is not enough for their upcoming investment decisions. Therefore, there is a significant demand for the whole picture of firm’s financial position. As a financial analyst, how would you help them to extract following balance sheet items for the year 2014 from the above given ratios? (Marks 8) Fahad stitching unit Balance sheet As on 31st December 2014 Assets Rs. Liabilities and Owner’s equity Rs. Cash Notes and payables 100,000 Accounts receivable Long term debt Inventory Common stock 100,000 Plant and equipment Retained earnings 100,000 Total assets Total liabilities and shareholder’s equity 2. Why investors give importance to the analysis of balance sheet? Should they also give importance to firm’s income statement and why? (Marks 2) Learning Outcome After attempting this assignment, students would be able to apply ratios and raw information for making financial decisions.