Question : The analysis of financial statements prepared on historical costs…………..
Option 1: Ignores price level changes
Option 2: Two or more accounting period
Option 3: Either 1 and 2
Option 4: None of the above
Correct Answer: Ignores price level changes
Solution : Answer = Ignores price level changes
The financial statement does not account for the change in price level because it is based on the historical cost approach. The data from various years are obtained at nominal values rather than real values (i.e., without accounting for changes in price). Hence, the correct option is 1.
Question : Horizontal analysis reviews and analyses financial statements of ………….
Question : Financial Statement analysis ignores price level changes. It is its ………
Option 1: objective
Option 2: limitation
Option 3: either 1 and 2
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