Briefly explain the meaning of the following terms and concepts: (i) Standardized financial statements (2 Marks) (ii) Financial forecasting (2 Marks) Distinguish between the following: (i) Trend analysis and cross-sectional analysis. (4 Marks) (ii) Vertical analysis and horizontal analysis (4 Marks) Explain any four (4)limitations of financial statement analysis. (8 Marks)

(i) Standardized financial statements: Standardized financial statements are financial reports that have been adjusted to a common set of accounting standards or guidelines. This allows for easier comparison between different companies or time periods. Standardization ensures that financial statements are presented in a consistent and comparable manner, making it easier for users to analyze and interpret the financial information.<br /><br />(ii) Financial forecasting: Financial forecasting is the process of predicting future financial outcomes based on historical data, current trends, and assumptions about future events. It involves estimating future revenues, expenses, cash flows, and other financial metrics. Financial forecasting is used by businesses to make informed decisions, plan for future growth, and manage risks.<br /><br />Distinguish between the following:<br /><br />(i) Trend analysis and cross-sectional analysis: Trend analysis involves examining financial data over a period of time to identify patterns, trends, and changes. It focuses on the relationship between variables over time. Cross-sectional analysis, on the other data at a specific point in time, comparing different entities or variables within the same time frame. It focuses on the differences between entities or variables at a particular point in time.<br /><br />(ii) Vertical analysis and horizontal analysis: Vertical analysis involves analyzing a financial statement by expressing each line item as a percentage of a base amount, such as total assets or total revenue. It allows for comparison of the relative size of each line item within the same financial statement. Horizontal analysis, on the other hand, compares financial statements over multiple periods, expressing each line item as a percentage of a base period. It allows for comparison of changes in financial statement items over time.<br /><br />Explain any four (4) limitations of financial statement analysis:<br /><br />1. Subjectivity: Financial statement analysis is subjective and can be influenced by the analyst's personal biases, assumptions, and interpretations. Different analysts may arrive at different conclusions based on the same financial data.<br /><br />2. Historical nature: Financial statements provide historical information and may not reflect current market conditions or future events. This can limit the usefulness of financial statement analysis in predicting future outcomes.<br /><br />3. Lack of non-financial information: Financial statement analysis focuses primarily on numerical data and may overlook important non-financial factors that can impact a company's performance, such as management quality, industry trends, or regulatory changes.<br /><br />4. Manipulation and accounting choices: Companies may engage in accounting practices or manipulate financial statements to present a more favorable financial position. This can lead to inaccurate or misleading financial information, making it challenging for analysts to accurately assess a company's financial health.