Which statements are true? (A) The financial statements of a business…

The correct answer is Option (1) → (A), (B) and (C) only

Financial statements and their analysis serve many users, and each statement turns on what the statements contain and what the tools of analysis do.

(A) The financial statements of a business enterprise include cash flow statement. Correct. Along with the balance sheet and the statement of profit and loss, the cash flow statement is one of the financial statements a company prepares.

(B) Comparative statements are the form of horizontal analysis. Correct. They set the figures of two or more periods side by side, so the same item is read across the years; this is horizontal analysis.

(C) Ratio analysis help business in identifying the problem areas. Correct. Properly analysed ratios show the problem areas as well as the bright spots of the business, which helps management act in future.

(D) Financial analysis is used only by the creditors. Incorrect. Managers, investors, lenders, employees and the government all use it; creditors are only one group of users.