Financial statement analysis should be included in investment analysis because
A) A firm's business conditions can be compared with similar firms to determine whether its current operations are average or above or below average.
B) We can predict earnings and dividends by forecasting the future financial conditions.
C) We can use the accounting statements and information regarding current and forecasted business conditions to form expectations regarding the risk of the firm's future operations.
D) Only a and b are valid reasons.
E) a,b and c are all valid reasons.

Question

Quizplus · Accepted Answer

Financial statement analysis is an integral part of investment analysis as it helps in comparing a firm's business conditions with similar firms, predicting earnings and dividends, and forming expectations regarding the risk of the firm's future operations. Thus, all of the given reasons i.e. a, b, and c are valid and essential for effective investment analysis.

Financial Statement Analysis Should Be Included in Investment Analysis Because