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Question
The process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the various items of Balance Sheet and the Statement of Profit and Loss is called ______.
Options
Comparative Statement Analysis
Cash Flow Analysis
Financial Analysis
Common Size Analysis
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Solution
The process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the various items of the balance sheet and the statement of profit and loss is called financial analysis.
Explanation:
Financial Analysis is the overall process of evaluating a company’s performance and stability. It involves analysing data from the Balance Sheet and Statement of Profit and Loss to understand the firm’s financial health (strengths and weaknesses).
