Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Analysis of Financial Statements

Question:
The analysis of financial statement by a shareholder is an example of:
Options:
Horizontal Analysis
Vertical analysis
External Analysis
Internal Analysis
Correct Answer:
External Analysis
Explanation:
The analysis which is conducted by an outsider without having any access to the basic accounting record of the firm, it is called external analysis of financial statements. These outsiders may be creditors, shareholders, investors or the credit agencies. This analysis serves only limited purpose because it is dependent on the published financial data of the firm.