Financial Statements Analysis — Important Questions

Absolute Change column

The Absolute Change column in a comparative balance sheet shows the difference (increase or decrease) between the current year and previous year figures.

True

One of the main advantages of financial analysis is measuring the profitability of a business by assessing whether adequate profits are being earned on capital invested.

It ignores qualitative aspects

Financial analysis only considers monetary transactions and ignores qualitative factors like management efficiency, employee relations, etc., which are important for business success.

Sales and expenses over different years

A comparative income statement compares items like sales, expenses, and profits across different accounting periods to analyze trends and performance.