Analysis of Financial Statements · Class 12 · CBSE · Commerce Accountancy
Which of the following tools of financial analysis is considered a dynamic analysis because it studies changes in financial statements over a period…
Practice question from Analysis of Financial Statements (Class 12 · CBSE · Commerce Accountancy), with the correct answer and a step-by-step solution.
medium · MCQ · Q-DA62C3
Which of the following tools of financial analysis is considered a dynamic analysis because it studies changes in financial statements over a period of several years?
- A.Comparative Statements
- B.Common Size Statements
- C.Trend AnalysisCorrect answer
- D.Ratio Analysis
Solution
Trend analysis involves computing the percentage changes of various financial statement items over a series of accounting years, usually taking a base year as 100. This makes it a dynamic analysis as it covers multiple periods, unlike comparative statements which typically compare only two consecutive periods.
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