Question

_____ is not a tool of 'Analysis of Financial Statements'.

Hint:

Distinguish between the Financial Statements (Balance Sheet, Income Statement, Cash Flow Statement, Statement of Changes in Equity, Notes) and the Tools used to analyze them (Comparative, Common-Size, Ratio Analysis, Trend Analysis, Cash Flow Analysis).

Answer 1

Tools of Financial Statement Analysis are techniques used to interpret the data presented in financial statements. Common tools include: \begin{itemize} \item[(B)] Ratio Analysis: Calculates relationships between various financial statement items. \item[(C)] Comparative Statements: Shows financial data for two or more periods side-by-side to identify trends. \item[(D)] Cash Flow Statement: Analyses the inflows and outflows of cash. (Also considered a financial statement itself, but its preparation and analysis are tools). \item[( )] Common-Size Statements: Expresses items as a percentage of a common base (e.g., Revenue or Total Assets). \item[( )] Trend Analysis: Analyses changes over several years. \end{itemize} The Income Statement (A) is one of the primary financial statements being *analyzed*, not a tool *of* analysis itself.