Matching Financial Analysis Tools with Their Definitions

Let me match each financial analysis tool with its correct definition:

(A) Comparative Statements → (IV)

Comparative Statements present financial data for two or more periods side by side. They allow comparison of profitability and financial position across different time periods (like 2022 vs 2023). This helps in understanding changes over time.

Match: (IV) - Statements showing profitability and financial position for different periods in comparative form

(B) Common Size Statements → (I)

Common Size Statements convert all items into percentages of a common base. For example:

• In Balance Sheet: All items as % of Total Assets
• In Profit & Loss: All items as % of Revenue from Operations

Match: (I) - Statements expressing each item as percentage of a common item

(C) Trend Analysis → (II)

Trend Analysis studies financial data over multiple years (usually 5-10 years) to identify patterns and trends. It involves calculating trend percentages with a base year.

Match: (II) - Technique of studying operational results over a series of years

(D) Ratio Analysis → (III)

Ratio Analysis establishes mathematical relationships between different items of financial statements (like Current Assets : Current Liabilities or Net Profit : Sales).

Match: (III) - Describes significant relationship between items of Balance Sheet and P&L

Final Matching:

(A) - (IV), (B) - (I), (C) - (II), (D) - (III)

Correct Answer: Option 2