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Question
What is the importance of comparative statements? Illustrate your answer with particular reference to comparative income statement.
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Solution
The following are the importance of Comparative Statements:
(i) Make Presentation:
Simpler Comparative statements presents the financial data in a simpler form. On the other hand, an year-wise data of the same items are presented side-by-side, which not only makes the presentation clear but also enables easy comparisons (both intra-firm and inter-firm) conclusive.
(ii) Help in Drawing Conclusion:
The presentation of comparative statement is so effective that it helps the analyst to draw conclusion quickly and easily and that too without any ambiguity.
(iii) Help in Forecasting:
The management may analyse the trend and forecast and draft various future plans and policy measures, with the help of comparative statement.
(iv) Help in Detection of Problems:
The comparative analysis not only enables the management in locating the problems but also help them to put various budgetary controls and corrective measures to check whether the current performance is aligned with that of the planned targets. With the help of the comparison of the financial data of two or more years, the financial management can easily detect the problems.
(i) Make Presentation:
Simpler Comparative statements presents the financial data in a simpler form. On the other hand, an year-wise data of the same items are presented side-by-side, which not only makes the presentation clear but also enables easy comparisons (both intra-firm and inter-firm) conclusive.
(ii) Help in Drawing Conclusion:
The presentation of comparative statement is so effective that it helps the analyst to draw conclusion quickly and easily and that too without any ambiguity.
(iii) Help in Forecasting:
The management may analyse the trend and forecast and draft various future plans and policy measures, with the help of comparative statement.
(iv) Help in Detection of Problems:
The comparative analysis not only enables the management in locating the problems but also help them to put various budgetary controls and corrective measures to check whether the current performance is aligned with that of the planned targets. With the help of the comparison of the financial data of two or more years, the financial management can easily detect the problems.
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