Question

State whether the following is True or False:

Financial analysis is used only by the creditors.

Answer 1

This statement is false.

Explanation:

Financial analysis is a multi-purpose tool used by a wide variety of internal and external stakeholders, rather than being restricted only to creditors. While creditors examine it to evaluate a firm’s debt-repaying capacity, management relies on it to make strategic operating decisions. Investors evaluate it to check profitability and investment safety, while tax authorities use it to assess correct tax liabilities. Because financial statement analysis serves a broad ecosystem of users, not just creditors, the statement is false.