Choose a pair of correct statements.

(A) The only purpose of financial reporting is to keep the managers informed about the progress of operations.

(B) Analysis of data provided in the financial statements is termed as financial analysis.

(C) Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount.

(D) The ratio reflects quantitative and qualitative aspects of the results.

Choose the correct answer from the options given below:

(B) and (C) only

The correct answer is option 2- (B) and (C) only.

(A) The only purpose of financial reporting is to keep the managers informed about the progress of operations.  IT IS NOT TRUE. Financial reporting does inform managers, but that is not its only purpose. In fact, financial reporting serves multiple stakeholders like Investors and Shareholders to helps them to make decisions about buying, holding, or selling shares, to inform Creditors and Lenders in assessing the company’s ability to repay loans and interest. It also assists Management in providing data for planning, controlling, and decision-making.

(B) Analysis of data provided in the financial statements is termed as financial analysis. It IS TRUE.  The process of critical evaluation of the financial information contained in the financial statements in order to understand and make decisions regarding the operations of the firm is called ‘Financial Statement Analysis’. It is basically a study of relationship among various financial facts and figures as given in a set of financial statements, and the interpretation thereof to gain an insight into the profitability and operational efficiency of the firm to assess its financial health and future prospects.

(C) Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount. It IS TRUE. Long-term borrowings (such as loans, debentures, or bonds) are funds borrowed for a period typically exceeding one year. Lenders who provide these funds (like banks, financial institutions, or bondholders) are concerned about the firm's long-term solvency i.e. its ability to pay interest regularly, its ability to repay the principal amount when it becomes due.

(D) The ratio reflects quantitative and qualitative aspects of the results.  IT IS NOT TRUE. Ratio analysis is indispensable part of interpretation of results revealed by the financial statements. It provides users with crucial financial information and points out the areas which require investigation. Ratio analysis is a technique that involves regrouping of data by application of arithmetical relationships, though its interpretation is a complex matter. It requires a fine understanding of the way and the rules used for preparing financial statements. Accounting provides information about quantitative (or monetary) aspects of business. Hence, the ratios also reflect only the monetary aspects, ignoring completely the non-monetary (qualitative) factors.