The correct answer is option 1- A-IV, B-II, C-III, D-I
| List 1 |
List 2 |
| A) Comparative statement |
IV) Horizontal analysis |
| B) Common size statement |
II) Vertical analysis |
| C) Trend analysis |
III) Base year |
| D) Firm own comparison with previous year |
I) Intra-firm analysis |
Comparative Statements (Horizontal Analysis): Comparative statement is horizontal analysis. Comparative Statements are the statements showing the profitability and financial position of a firm for different periods of time in a comparative form to give an idea about the position of two or more periods. The financial data will be comparative only when same accounting principles are used in preparing these statements. Comparative figures indicate the trend and direction of financial position and operating results. This analysis is also known as ‘horizontal analysis’.
Common Size Statements (Vertical Analysis): Common Size Statements are the statements which indicate the relationship of different items of a financial statement with a common item by expressing each item as a percentage of that common item. The percentage thus calculated can be easily compared with the results of corresponding percentages of the previous year or of some other firms, as the numbers are brought to common base. Such statements also allow an analyst to compare the operating and financing characteristics of two companies of different sizes in the same industry. Thus, common size statements are useful, both, in intra-firm comparisons over different years and also in making inter-firm comparisons for the same year or for several years. This analysis is also known as ‘Vertical analysis’.
Trend Analysis: It is a technique of studying the operational results and financial position over a series of years. Using the previous years’ data of a business enterprise, trend analysis can be done to observe the percentage changes over time in the selected data. The trend percentage is the percentage relationship, in which each item of different years bear to the same item in the base year. Trend analysis is important because, with its long run view, it may point to basic changes in the nature of the business. By looking at a trend in a particular ratio, one may find whether the ratio is falling, rising or remaining relatively constant. From this observation, a problem is detected or the sign of good or poor management is detected.
Firm own comparison with previous year- Intra-firm comparison is a financial analysis technique used to compare different aspects of a company's financial performance and position across different periods within the same company. In other words, it involves analyzing financial data from multiple years or periods of the same company to identify trends, changes, and patterns in its financial metrics. |
