Accountancy Part BAnalysis of Financial Statements

Which one of the following is not a tool for analyzing financial stat…

Which one of the following is not a tool for analyzing financial statements?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Measure of central tendency

Tools of financial analysis study the figures of the financial statements themselves: they compare years, relate items to one another or trace the movement of cash. A measure of central tendency (mean, median, mode) is a statistical average; it is not one of the tools used to analyse financial statements.

Option (1) Comparative Statements — A tool of financial analysis. They place the figures of two or more periods side by side.
Option (2) Ratio Analysis — A tool of financial analysis. It relates one item of the statements to another.
Option (3) Cash flow statements — A tool of financial analysis. It shows the inflows and outflows of cash from operating, investing and financing activities.

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.”