Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Financial Statements of a Company

Question:

Who can get information about activities of business through its financial statements?

Options:

Lenders

Investors

Trade payables

All of these

Correct Answer:

All of these

Explanation:

Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the various items of the balance sheet and the statement of profit and loss. Financial analysis can be undertaken by management of the firm, or by parties outside the firm, viz., owners, trade creditors, lenders, investors, labour unions, analysts and others. The nature of analysis will differ depending on the purpose of the analyst. A technique frequently used by an analyst need not necessarily serve the purpose of other analysts because of the difference in the interests of the analysts.