Question

The tool of analysis of financial statements which indicates the trend and direction of financial position and operating results is _______.

• A. Comparative Statements
• B. Common Size Statements
• C. Cash Flow Analysis
• D. Ratio Analysis

Hint:

Comparative statements show trends over time and are vital for inter-period analysis. Turnover ratios help assess how well a business converts its assets into sales.

Answer 1

The Correct Option is A

The correct answer is (A) Comparative Statements.
Explanation: Comparative statements present financial data of two or more periods side by side to show trends and changes over time. This helps analysts and management to identify how the financial position and performance of a business is moving—whether upwards, stable or downwards. It is particularly useful for spotting trends in revenues, expenses, profits, and key balances such as assets and liabilities.