Which of the following is not an objective of an analysis of the Financial Statements of a company?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- Judge the variations in the accounting practices of the business followed by different enterprises.
The objectives of analysing financial statements of a company are as follows-
* To assess the current profitability and operational efficiency of the firm as a whole as well as its different departments so as to judge the financial health of the firm.
* To ascertain the relative importance of different components of the financial position of the firm.
* To identify the reasons for change in the profitability/financial position of the firm.
* To judge the ability of the firm to repay its debt and assessing the short-term as well as the long-term liquidity position of the firm.
THUS, OPTION 4 IS NOT ANY OBJECTIVE OF FINANCIAL ANALYSIS.