Advertisements
Advertisements
Question
Statement I: Comparative Financial Statement is the horizontal analysis of financial statements.
Statement II: Comparative statements help in intra-firm comparison.
Options
Both statements are correct.
Both statements are incorrect.
Statement I is correct, and Statement II is incorrect.
Statement I is incorrect, and Statement II is correct.
Advertisements
Solution
Both statements are correct.
Explanation:
Comparative Financial Statements present accounting data side-by-side across two or more years. This lets analysts trace growth trends across rows over time, which defines horizontal analysis. Statement II is also correct because placing multiple consecutive periods of the same firm side-by-side serves as the baseline requirement for intra-firm (inter-period) comparison, helping management evaluate its own internal progress and operational patterns across different financial years.
