Accountancy Part BAnalysis of Financial Statements

The commonly used Techniques of financial Statements Analysis include…

The commonly used Techniques of financial Statements Analysis includes :

(A) Common size statements

(B) Ratio Analysis

(D) Capital Budgeting Statement

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (A), (B) and (C) only

The tools used to analyse financial statements are comparative statements, common size statements, trend analysis, ratio analysis and cash flow analysis.

(A) Common size statements — Correct. Common size statements show each item as a percentage of a common base.

(B) Ratio Analysis — Correct. Ratio analysis studies the relationship between items of the statements.

(C) Trend Analysis — Correct. Trend analysis studies the figures over a series of years.

(D) Capital Budgeting Statement — Incorrect. Capital budgeting is a technique for choosing long-term investment projects; it is not a tool for analysing financial statements.

NCERT (2026-27 edition):
Tools of Financial Analysis – “… Commonly used tools of financial analysis are: Comparative statements, Common size statement, trend analysis, ratio analysis, and cash flow analysis.”