The correct answer is D. All of the above.
Financial statement analysis is the process of evaluating a company’s financial statements to understand its financial position, profitability, and liquidity. It involves looking at the company’s balance sheet, income statement, and cash flow statement.
The balance sheet is a snapshot of a company’s financial position at a specific point in time. It shows the company’s assets, liabilities, and owner’s equity. The income statement shows a company’s revenues and expenses over a period of time, usually a quarter or a year. The cash flow statement shows how a company’s cash flows in and out over a period of time.
Financial statement analysis can be used to identify a company’s strengths and weaknesses, and to make predictions about its future performance. It can also be used to compare a company’s performance to its competitors, or to its own performance in previous years.
Here is a brief explanation of each option:
- Option A: Final analysis always involves the use of various financial statements i.e., balance sheet and income statement.
This is true because the balance sheet and income statement are the two most important financial statements. They provide the most information about a company’s financial position and performance.
- Option B: The balance sheet is the summary of assets, liabilities and owner’s equity of business at a point in time.
This is also true. The balance sheet shows a company’s assets, liabilities, and
owner’s equity at a specific point in time.- Option C: The income statement is the summary of revenues and expenses of a firm over a particular period of time.
This is also true. The income statement shows a company’s revenues and expenses over a period of time, usually a quarter or a year.
Therefore, the correct answer is D. All of the above.