Question : Which of the following is a limitation of Financial Statement Analysis?
Option 1: Ignores the Qualitative elements
Option 2: Not free from personal bias
Option 3: Both 1 and 2
Option 4: None of the above
Correct Answer: Both 1 and 2
Solution : Answer = Both 1 and 2
1. Bias: Financial statements are the result of documented facts, applied accounting principles and practices, and the accountants' subjective assessments based on various circumstances. As a result, bias could be seen in the data, and financial statements might not accurately represent the situation financially. 2. Absence of Qualitative Information: Financial statements only include quantitative data; they do not provide qualitative data on labour relations, industrial relations, industrial climate, work quality, etc. Hence, the correct option is 3.
Question : Which of the following statements is incorrect?
Option 1: Ignores the Qualitative Elements is a limitation of Financial Statement Analysis
Option 2: Not free from personal bias is a limitation of Financial Statement Analysis
Option 3: Ignores the price level changes is a limitation of Financial Statement Analysis
Question : Financial statement analysis is not free from……………..bias.
Option 1: Personal
Option 2: Non personal
Question : Choose which of the following statements is true.
Option 1: Determining operating efficiency and profitability is not an objective of financial analysis.
Option 2: Financial analysis is used for credit analysis.
Option 3: Financial Statement analysis does not ignore qualitative elements.
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