Advertisements
Advertisements
Question
Assertion (A): A ratio is a quantitative aspect of results.
Reason (R): Ratio analysis establishes a relationship between two related items of financial statements.
In the context of the above two statements, which option is correct?
Options
Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).
Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (А).
Assertion (A) is correct, and Reason (R) is incorrect.
Assertion (A) is not correct, but Reason (R) is correct.
Advertisements
Solution
Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).
Explanation:
Assertion (A) is correct because ratios look only at numerical, quantitative data. Reason (R) is also correct because ratio analysis links related items from financial statements. However, the reason is not the correct explanation for the assertion. Explaining how ratios connect financial items does not provide the logical reason as to why they represent a quantitative aspect.
