Question

Assertion (A): Financial Statement Analysis is a systematic process of analysing the financial data for its easy understanding and decision-making.

Reason (R): Financial Statements are analysed using analytical tools such as Comparative Statements, Common-size Statements, Ratios and Cash Flow Statement.

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

Options

• Both Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation for Assertion (A).

• Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation for Assertion (A).

• Assertion (A) is correct, but Reason (R) is not correct.

• Both Assertion (A) and Reason (R) are not correct.

Answer 1

Both Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation for Assertion (A).

Explanation:

A correctly defines financial statement analysis as a systematic process to simplify and interpret financial data for decision‑making, and R correctly lists commonly used analytical tools (Comparative statements, Common‑size statements, Ratios and Cash Flow statement). However, listing the tools (R) does not itself explain why the analysis is a systematic process aimed at easy understanding and decision‑making, so R is not the correct explanation of A.