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Question
Which of the following comes under the objectives of financial analysis?
Options
To assess the current profitability and operational efficiency of the firm
To identify the reasons for change in the profitability/ financial position of the firm.
To ascertain the relative importance of different components of the financial position of the firm
All of the above
MCQ
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Solution
All of the above.
Explanation:
The financial analysis is carried out for the following reasons:
- To analyze the firm's financial health, assess the current profitability and operational efficiency of the company as a whole, as well as its many departments.
- Determine the relative importance of various aspects of the firm's financial status.
- To figure out why the company's profitability or financial condition has changed.
- To examine the firm's short- and long-term liquidity condition, as well as its capacity to repay its debt.
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