Read the following passage and answer the question.

INA Ltd is a company that deals in 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.

If Raman is to analyse the financial statements for the top management, what should he consider?

To see that the resources of the firm are used most efficiently and that the firm's financial condition is sound

The correct answer is option 3- To see that the resources of the firm are used most efficiently and that the firm's financial condition is sound.

If Raman is to analyse the financial statements for the top management, he should he consider whether the resources of the firm are used most efficiently and the firm's financial condition is sound or not.

The process of critical evaluation of the financial information contained in the financial statements in order to understand and make decisions regarding the operations of the firm is called ‘Financial Statement Analysis’.

Top management: The importance of financial analysis has a broad scope which includes top management in general and other functional managers. Management of the firm would be interested in every aspect of the financial analysis. It is their overall responsibility to see that the resources of the firm are used most efficiently and that the firm’s financial condition is sound. Financial analysis helps the management in measuring the success of the company’s operations, appraising the individual’s performance and evaluating the system of internal control.