Ratio analysis establishes a ............... between items of two financial statements of a company.

Relationship

The correct answer is option 1- Relationship.

Ratio Analysis describes the significant relationship which exists between various items of a balance sheet and a statement of profit and loss of a firm. As a technique of financial analysis, accounting ratios measure the comparative significance of the individual items of the income and position statements. It is possible to assess the profitability, solvency and efficiency of an enterprise through the technique of ratio analysis.