Practicing Success
Practicing Success
CUET Preparation Today
| INA Ltd is a company that deals in the manufacturing of pharmaceutical products. Raman has recently been hired as an assistant to the accountant of INA Ltd. The accountant of the firm Mr. Rajat asks Raman to go for financial statement analysis of the firm to assess the financial position of the firm. To judge the knowledge and capabilities of Raman, Mr. Rajat asked him to analyze the financial statements from the viewpoint of various parties interested in the firm eg. the management, the lenders, the investors, labour unions, government, etc. |
| While analysing the financial statements, Raman should be conscious of which of the following? |
The window dressing of financial statements Changes in accounting policies of a firm Personal judgments All of the above |
| All of the above |
| Though financial analysis is quite helpful in determining financial strengths and weaknesses of a firm, it is based on the information available in financial statements. As such, the financial analysis also suffers from various limitations of financial statements. Hence, the analyst must be conscious of the impact of price level changes, window dressing of financial statements, changes in accounting policies of a firm, accounting concepts and conventions, personal judgements. |
