Practicing Success
Which of the following is the purpose or objective of analysis of financial statements of the company? |
To assess the current profitability of the firm To measure the solvency of the firm To assess the short-term and long-term liquidity position of the firm All the above |
All the above |
The correct answer is option 4- All the above. All of the above are objectives of analysis of financial statements of the company. Analysis of financial statements reveals important facts concerning managerial performance and the efficiency of the firm. The objectives of the analysis are to apprehend the information contained in financial statements with a view to know the weaknesses and strengths of the firm and to make a forecast about the future prospects of the firm thereby, enabling the analysts to take decisions regarding the operation of, and further investment in the firm. The Financial Statement analysis is undertaken to serve the following purposes (objectives):
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