Which among the following are the commonly used tools for financial analysis?

(A) Horizontal analysis

(B) Vertical analysis

(C) Ratio analysis

(D) Trend analysis

Choose the correct answer from the options given below:

Financial analysis uses various tools to interpret and evaluate financial statements. Each option given represents a valid and commonly used tool:

Horizontal Analysis compares financial data across multiple time periods (year-to-year or period-to-period) to identify trends, growth patterns, and changes in absolute figures.

Vertical Analysis (also called Common Size Statement) expresses each item in a financial statement as a percentage of a base figure - such as each asset as a percentage of total assets, or each expense as a percentage of sales.

Ratio Analysis involves calculating and interpreting various financial ratios to assess different aspects of business performance like liquidity (Current Ratio), profitability (Net Profit Ratio), solvency (Debt-Equity Ratio), and efficiency (Inventory Turnover Ratio).

Trend Analysis studies the movement of financial data over multiple periods (typically 5-10 years) by converting figures into index numbers or percentages, taking one year as the base year.

All four methods are fundamental tools taught in financial statement analysis and are regularly employed by accountants, analysts, and management for decision-making purposes.

Correct Answer: Option 3 - (A), (B), (C) and (D)