Question

Assertion (A): Comparative Statements help in forecasting.

Reason (R): Comparative Statements indicates a trend in various financial variables of the enterprise.

In the context of the above two statements, which of the following is correct?

Options

• Both A and R are correct, and R is the correct explanation of A.

• Both A and R are correct, but R is not the correct explanation of A.

• A is correct, but R is incorrect.

• A is incorrect, but R is correct.

Answer 1

Both A and R are correct, and R is the correct explanation of A.

Explanation:

Both statements are correct because Comparative Statements present financial data for multiple years side-by-side to reveal the structural trajectories and trends of business variables over time. Since tracking these historical data patterns is the exact foundation used by management to map out future growth and budget requirements, identifying these trends is what directly enables successful business forecasting.