What is the primary purpose of financial statement analysis?
Practice Questions
1 question
Q1
What is the primary purpose of financial statement analysis?
To prepare tax returns
To assess the financial health of a business
To comply with accounting standards
To calculate depreciation
The primary purpose of financial statement analysis is to assess the financial health and performance of a business, helping stakeholders make informed decisions.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the primary purpose of financial statement analysis?
Solution: The primary purpose of financial statement analysis is to assess the financial health and performance of a business, helping stakeholders make informed decisions.
Steps: 5
Step 1: Understand that financial statements are reports that show how a business is doing financially.
Step 2: Recognize that financial statement analysis involves looking closely at these reports to find important information.
Step 3: Identify that the main goal of this analysis is to evaluate the financial health of the business.
Step 4: Realize that by assessing financial health, stakeholders (like investors, managers, and creditors) can make better decisions.
Step 5: Conclude that the primary purpose is to help stakeholders understand the business's performance and make informed choices.
