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irina1246 [14]
4 years ago
10

The least effective method for comparing financial statement information between companies is:

Business
1 answer:
Ulleksa [173]4 years ago
5 0

Answer:

<em>(d) to focus on changes in financial statement numbers</em>

<em></em>

Explanation:

  1. <em>Ratio Analysis </em>beautifully captures the analysis of  financials analysis of the company. The levels of leverage, liquidity and costs coverage etc. are all highlighted by ratio analysis. The crucial ratios like the Interest Coverage ratio, Debt Equity ratio, Debt ratio and Current Ratio etc. can all be compared of different companies for a better analysis.
  2. <em>Horizontal analysis </em>highlights the key changes in the financial numbers of the current quarter/year with respect to the previous quarter /year respectively like the change in sales, gross profit, operating profit and operating expenses etc. Thus, the relative rate of change in key numbers of companies can be compared.
  3. <em>Cash Flow Statement analysis</em> focuses on the cash flows earned by the business from operating (operational) activities, investment activities (fixed assets cash flows and investing receipts) and cash flows from financing activities (long term finance sources transactions and finance payments of dividend and interest). Thereby, the net increase/decrease in cash flows of companies can be studied for comparison between them.
  4. <em>The focus on changes in the financial statement numbers </em>is the least effective method out of all the options. All the analysis of the key financial measures of companies whether in absolute or relative form are fully captured by the options (a), (b) & (c) given in the problem as indicated above.

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