Question

Assertion (A): Horizontal Analysis is generally useful in Cross-sectional Analysis.

Reason (R): Horizontal Analysis does not provide information in absolute and percentage form.

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 not correct.

Explanation:

Assertion (A) is false because Horizontal Analysis tracks a single firm over multiple years, while Cross-sectional Analysis compares different firms. Reason (R) is also false because Horizontal Analysis (Comparative Statements) explicitly shows changes in both absolute amounts and percentages.