Question

Which of the following is true of financial statement analysis? (what is the correct answer and please explain why

Answers:	Its inputs must be qualitative to be useful for forecasting and valuation.
	It cannot draw conclusions about the future, since only past information is observable.
	It is performed by a limited number of stakeholder groups, primarily analysts.
	It may involve the analysis of information outside the financial statements, such as footnotes and proxy statements.

Answer 1

The correct answer is It may involve the analysis of information outside the financial statements, such as footnotes and proxy statements.

The analysis of financial statements requires the use of footnotes and other proxy statements as it shows how the company has calculated the financial figures and it gives various information about contingent liabilities, market value of investments which shows the accurate position and the growth of the company. Also, it draws conclusions about the future using previous financial informations and the data must be quantitative.