Question

The preparation and analysis of comparative balance sheets and income statements are commonly applied tools of financial statement analysis and interpretation.

Required:
a. Discuss the inherent limitations of analyzing and interpreting financial statements for a single year. Include in your discussion the extent that these limitations are overcome by use of comparative financial statements computed over more than one year.
b. A year-to-year analysis of comparative balance sheets and income statements is a useful analysis tool. Still, without proper care, such analysis can be misleading. Discuss factors or conditions that contribute to such a possibility. How can additional information and supplementary data (beyond financial statements) help prevent this possibility?



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  • CreatedJanuary 22, 2015
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