Question

Give two objectives of comparative financial statements.

Answer 1

1. To make the data simpler and more understandable: Preparing comparative financial statements simplifies and compares data across years. When comparing data over multiple years, it allows for easy comparisons and inferences regarding a company’s performance and financial health.
2. To indicate the trend: Comparative financial statements compare production, sales, expenses, and profits over multiple years to show trends. Increased sales and profit margins over time indicate a healthy business growth trend.