Question

Which of the following is not a purpose of analysis of financial statements?

• A. To assess the current profitability and the operational efficiency of the firm.
• B. To ascertain the relative importance of different components of financial position of the firm.
• C. To just study the reports of the company.
• D. To judge the ability of the firm to repay its debt.

Hint:

Financial statement analysis is done to assess performance, not just to read reports.

Answer 1

The Correct Option is C

Analysis of financial statements is done to evaluate a firm’s financial health, including profitability, efficiency, solvency, and liquidity. Merely studying the reports without deriving any conclusions defeats the purpose.
Hence, the correct answer is (C), as it does not reflect an actual objective of financial statement analysis.