Which of the following is NOT included in financial statement analysis?

Question

Options

• AVertical analysis
• BHorizontal analysis
• CFraction analysis
• DRatio analysis

• A
  14% (5)
• B
  3% (1)
• C
  77% (27)
• D
  6% (2)

Explanation

Fraction analysis is not a recognized method in financial statement analysis - it simply doesn't exist as a formal technique, making C the correct answer.

Vertical analysis (A) is real: it expresses each line item as a percentage of a base figure (e.g., revenue), allowing comparisons across companies of different sizes. Horizontal analysis (B) is real: it compares financial data across multiple periods to identify trends and growth rates. Ratio analysis (D) is real and arguably the most widely used technique, calculating relationships between line items (e.g., current ratio, debt-to-equity) to assess liquidity, profitability, and leverage.

Memory tip: The three legitimate methods all have clear directional or relational meanings - vertical (up/down a single statement), horizontal (across time), ratio (one number relative to another). "Fraction" sounds mathematical but has no distinct meaning in this context that isn't already covered by ratio analysis, so it's the odd one out.

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