Which among the following is NOT TRUE about the financial statement?

Option 4 is NOT TRUE about financial statements.

Financial analysis is used by multiple stakeholders, not just creditors. The various users include:

• Management - for planning, controlling, and decision-making
• Investors - to assess profitability and return on investment
• Creditors - to evaluate creditworthiness and loan repayment capacity
• Employees - to assess job security and growth prospects
• Government - for taxation and regulatory purposes
• Customers - to assess business stability
• Researchers and analysts - for study and advisory purposes

Let's verify why the other options are TRUE:

Option 1 is correct because financial statements of a business enterprise comprise:

• Balance Sheet (Statement of Financial Position)
• Statement of Profit & Loss
• Cash Flow Statement (mandatory for certain companies)

Option 2 is correct because vertical analysis involves analyzing data within the same period. Both common size statements (expressing items as percentage of base figure) and financial ratios (comparing items within same period) are tools of vertical analysis.

Option 3 is correct because comparative statements show financial data for two or more periods side by side, allowing period-to-period comparison, which is the essence of horizontal analysis.