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Select the correct code for the following two statements of Assertion (A) and Reasoning (R):
Assertion (A): Risk analysis of capital investment is the most complex and controversial area in finance.
Reasoning (R): Capital investment decisions are based on estimates of future cash inflows.
  • a)
    (A) is incorrect, but (R) is correct.
  • b)
    (A) is correct, but (R) is incorrect.
  • c)
    (A) and (R) both are correct, and (R) is the right explanation of (A).
  • d)
    (A) and (R) both are correct, but (R) is not the right explanation of (A).
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Select the correct code for the following two statements of Assertion ...
Assertion (A): Risk analysis of capital investment is the most complex and controversial area in finance.
Reasoning (R): Capital investment decisions are based on estimates of future cash inflows.

Explanation:
The correct answer is option 'C', which states that both the assertion (A) and reasoning (R) are correct, and (R) is the right explanation of (A).

Complex and Controversial Area:
The assertion (A) states that risk analysis of capital investment is the most complex and controversial area in finance. This is true because capital investment decisions involve a significant amount of money and have long-term implications. They require a thorough evaluation of various factors, such as market conditions, competition, technological advancements, and regulatory environment. Identifying and assessing the risks associated with these factors is a complex task that requires expertise and experience. Additionally, there are often differing opinions and perspectives on risk analysis, leading to controversies and debates among financial professionals.

Estimates of Future Cash Inflows:
The reasoning (R) states that capital investment decisions are based on estimates of future cash inflows. This is also true because the primary objective of capital investment is to generate returns and create value for the investors. To evaluate the feasibility and profitability of an investment opportunity, financial analysts estimate the future cash inflows that the investment is expected to generate. These estimates are based on various factors, such as sales projections, market trends, cost analysis, and industry forecasts. The accuracy of these estimates is crucial as they form the basis for determining the risk and return profile of the investment.

Explanation of Assertion:
The reasoning (R) provides a valid explanation for the assertion (A). The complexity and controversy surrounding risk analysis in capital investment arise from the fact that investment decisions heavily rely on estimates of future cash inflows. The accuracy and reliability of these estimates are crucial in determining the potential risks associated with the investment. If the estimates are flawed or unreliable, it can lead to incorrect risk assessments and potentially disastrous investment decisions.

Overall, the assertion (A) and reasoning (R) are both correct, and the reasoning provides a logical explanation for the complexity and controversy surrounding risk analysis in capital investment. Hence, the correct answer is option 'C'.
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Community Answer
Select the correct code for the following two statements of Assertion ...
Risk analysis of capital investment is the most complex and controversial area in finance. Risk analysis is so important to the capital budgeting process because managers need the appropriate data to make decisions on the current and future assets of the organisation. To ensure that the company is not overwhelmed by bad decisions, the risk analysis is a tool that gives the manager the ability to mitigate risk. Capital expenditure decisions are irreversible because it involves huge cash outlay and if they are reversible they involve huge costs.
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Select the correct code for the following two statements of Assertion (A) and Reasoning (R):Assertion (A): Risk analysis of capital investment is the most complex and controversial area in finance.Reasoning (R): Capital investment decisions are based on estimates of future cash inflows.a)(A) is incorrect, but (R) is correct.b)(A) is correct, but (R) is incorrect.c)(A) and (R) both are correct, and (R) is the right explanation of (A).d)(A) and (R) both are correct, but (R) is not the right explanation of (A).Correct answer is option 'C'. Can you explain this answer?
Question Description
Select the correct code for the following two statements of Assertion (A) and Reasoning (R):Assertion (A): Risk analysis of capital investment is the most complex and controversial area in finance.Reasoning (R): Capital investment decisions are based on estimates of future cash inflows.a)(A) is incorrect, but (R) is correct.b)(A) is correct, but (R) is incorrect.c)(A) and (R) both are correct, and (R) is the right explanation of (A).d)(A) and (R) both are correct, but (R) is not the right explanation of (A).Correct answer is option 'C'. Can you explain this answer? for UGC NET 2025 is part of UGC NET preparation. The Question and answers have been prepared according to the UGC NET exam syllabus. Information about Select the correct code for the following two statements of Assertion (A) and Reasoning (R):Assertion (A): Risk analysis of capital investment is the most complex and controversial area in finance.Reasoning (R): Capital investment decisions are based on estimates of future cash inflows.a)(A) is incorrect, but (R) is correct.b)(A) is correct, but (R) is incorrect.c)(A) and (R) both are correct, and (R) is the right explanation of (A).d)(A) and (R) both are correct, but (R) is not the right explanation of (A).Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UGC NET 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Select the correct code for the following two statements of Assertion (A) and Reasoning (R):Assertion (A): Risk analysis of capital investment is the most complex and controversial area in finance.Reasoning (R): Capital investment decisions are based on estimates of future cash inflows.a)(A) is incorrect, but (R) is correct.b)(A) is correct, but (R) is incorrect.c)(A) and (R) both are correct, and (R) is the right explanation of (A).d)(A) and (R) both are correct, but (R) is not the right explanation of (A).Correct answer is option 'C'. Can you explain this answer?.
Solutions for Select the correct code for the following two statements of Assertion (A) and Reasoning (R):Assertion (A): Risk analysis of capital investment is the most complex and controversial area in finance.Reasoning (R): Capital investment decisions are based on estimates of future cash inflows.a)(A) is incorrect, but (R) is correct.b)(A) is correct, but (R) is incorrect.c)(A) and (R) both are correct, and (R) is the right explanation of (A).d)(A) and (R) both are correct, but (R) is not the right explanation of (A).Correct answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for UGC NET. Download more important topics, notes, lectures and mock test series for UGC NET Exam by signing up for free.
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