A) Comparative statements and the financial ratios are the two tools employed in vertical analysis- This statement is wrong, these two tools are employed in horizontal analysis.
B) Common size statements are the form of horizontal analysis - This statement is wrong because common size statements are vertical analysis.
C) Cash flow statements is a tool of financial statements analysis- This statement is true. the various tool for financial analysis is common size statement, comparative statements, accounting ratios, cash flow statement, trend analysis etc.
D) Ratio analysis establishes the relationship between two financial variables- This statement is true. A ratio is a mathematical figure used to depict the relationship between two or more numbers, and it can be represented as a fraction, proportion, percentage, or a multiple. When this figure is computed by comparing two accounting values obtained from financial statements, it is referred to as an accounting ratio.
E) In a common size statements, each item is expressed as a percentage of some common base- This statement is true. Common size financial statements are financial reports that present financial information as a percentage of total revenue or total assets, depending on the statement's focus. These statements are used to analyze and compare the relative proportions of various financial elements within a company's financial statements. |
