Which of the following is True about analysis of financial statements-

(A) The financial statements of a business enterprise include cash flow statement.

(B) Financial analysis is used only by the creditors.

(C) Comparative statements are the form of horizontal analysis.

(D) Financial analysis helps an analyst to arrive at a decision.

Choose the correct answer from the options given below:

Analyzing each statement:

(A) The financial statements of a business enterprise include cash flow statement.

This is True. The complete set of financial statements comprises Balance Sheet, Statement of Profit and Loss, Cash Flow Statement, and Notes to Accounts. Cash Flow Statement is a mandatory component as per AS-3.

(B) Financial analysis is used only by the creditors.

This is False. Financial analysis is used by multiple stakeholders including management, investors, creditors, employees, government authorities, and research analysts. It is not limited to creditors alone.

(C) Comparative statements are the form of horizontal analysis.

This is True. Horizontal analysis involves comparison of financial data across different time periods. Comparative statements display figures for two or more periods side by side for year-to-year comparison, which is the essence of horizontal analysis.

(D) Financial analysis helps an analyst to arrive at a decision.

This is True. The primary objective of financial analysis is to assist stakeholders in making informed decisions regarding investment, lending, management policies, and business operations.

Statements (A), (C), and (D) are true.

Correct Answer: Option 4