Accountancy Part BAnalysis of Financial Statements

Identify the tool of financial statement analysis that represents the…

Identify the tool of financial statement analysis that represents the relationship between two accounting figures.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Ratio Analysis

An accounting ratio expresses the relationship between two accounting figures (for example, current assets and current liabilities), and studying such ratios is ratio analysis.

NCERT (2026-27 edition):
Ratio Analysis – “… An important tool of financial statement analysis is ratio analysis. Accounting ratios represent relationship between two accounting numbers.”