Question

Assertion (A): ‘Vertical Analysis’ is also known as ‘Static Analysis’.

Reason (R): Vertical Analysis is based on the data of a single year.

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

Explanation:

Assertion (A) is correct because Vertical Analysis is structural and does not show moving trends over time. Reason (R) perfectly explains this because it uses the financial data of only a single year (like a Common-size Statement), making it a fixed, static snapshot.