Question

From the following, identify the incorrect statement related to ‘Analysis of Financial Statements’.

विकल्प

• Financial Statement Analysis is used only by the creditors.

• Financial Statement Analysis does not take price level changes into consideration.

• Financial Statement Analysis ignores non-monetary aspects.

• Financial StatementAnalysis helps to identify the reasons for change in profitability and financial position of the firm.

Answer 1

Financial Statement Analysis is used only by the creditors.

Explanation:

This statement is incorrect because financial statement analysis is a versatile tool used by a wide variety of both internal and external stakeholders. While creditors use it to check a company’s debt-repaying ability, it is equally important for shareholders to track investment returns, the management to make strategic corporate decisions, and tax authorities to check statutory compliance.