Which of the following combination of statements are NOT true-
(A) Financial analysis is used only by the creditors.
(B) Comparative statements are the form of vertical analysis
(C) The financial statements of a business enterprise include cash flow statement.
(D) Ratio analysis establishes relationship between two financial statements.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A) and (B) only
A) “Financial analysis is used only by the creditors.” Not true — Financial analysis is used by many stakeholders such as management, investors, creditors, and government, not only creditors.
(B) “Comparative statements are the form of vertical analysis.” Not true — Comparative statements are a form of horizontal analysis, as they compare financial data of two or more periods.
(C) “The financial statements of a business enterprise include cash flow statement.” True — The main financial statements include Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement.
(D) “Ratio analysis establishes relationship between two financial statements.” True — Ratios link items from Profit & Loss Account and Balance Sheet (e.g., Net Profit to Capital Employed).