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Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):
Assertion (A): Proprietary ratio establishes relationship between proprietor's fund and total assets.
Reason (R): The objective of calculating proprietary ratio is to measure proportion of fixed assets financed by shareholders' funds.
In the context of the above two statements, which of the following is correct? 
  • a)
    Both (A) and (R) are true and (R) is the correct explanation of (A).
  • b)
    Both (A) and (R) are true and (R) is not the correct explanation of (A)).
  • c)
    (A) is true but (R) is false.
  • d)
    (R) is true but (A) is false.
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Given below are two statements, one labelled as Assertion (A) and the ...
Assertion (A): Proprietary ratio establishes the relationship between proprietor's funds and total assets.
Reason (R): The objective of calculating the proprietary ratio is to measure the proportion of fixed assets financed by shareholders' funds.

The correct answer is option 'B', which states that both (A) and (R) are true, but (R) is not the correct explanation of (A).

Explanation:
Understanding the Proprietary Ratio:
The proprietary ratio is a financial ratio that measures the proportion of proprietor's funds (also known as shareholders' equity or net worth) in relation to total assets. It is used to determine the extent to which a company's assets are financed by the owners' investment.

Explanation of Assertion (A):
The assertion (A) states that the proprietary ratio establishes the relationship between proprietor's funds and total assets. This is true as the proprietary ratio is calculated by dividing proprietor's funds by total assets. It helps in assessing the financial soundness of a company and its ability to meet long-term obligations.

Explanation of Reason (R):
The reason (R) states that the objective of calculating the proprietary ratio is to measure the proportion of fixed assets financed by shareholders' funds. This is not the correct explanation of the proprietary ratio. The proprietary ratio considers all assets, not just fixed assets, and measures the overall proportion of proprietor's funds in relation to total assets. It does not specifically focus on fixed assets.

Conclusion:
While both the assertion (A) and reason (R) are true, the reason does not provide the correct explanation for the assertion. Therefore, option 'B' is the correct answer. The proprietary ratio is a useful financial ratio for analyzing the capital structure of a company and assessing its financial stability.
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Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):Assertion (A): Proprietary ratio establishes relationship between proprietors fund and total assets.Reason (R): The objective of calculating proprietary ratio is to measure proportion of fixed assets financed by shareholders funds.In the context of the above two statements, which of the following is correct?a)Both (A) and (R) are true and (R) is the correct explanation of (A).b)Both (A) and (R) are true and (R) is not the correct explanation of (A)).c)(A) is true but (R) is false.d)(R) is true but (A) is false.Correct answer is option 'B'. Can you explain this answer?
Question Description
Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):Assertion (A): Proprietary ratio establishes relationship between proprietors fund and total assets.Reason (R): The objective of calculating proprietary ratio is to measure proportion of fixed assets financed by shareholders funds.In the context of the above two statements, which of the following is correct?a)Both (A) and (R) are true and (R) is the correct explanation of (A).b)Both (A) and (R) are true and (R) is not the correct explanation of (A)).c)(A) is true but (R) is false.d)(R) is true but (A) is false.Correct answer is option 'B'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):Assertion (A): Proprietary ratio establishes relationship between proprietors fund and total assets.Reason (R): The objective of calculating proprietary ratio is to measure proportion of fixed assets financed by shareholders funds.In the context of the above two statements, which of the following is correct?a)Both (A) and (R) are true and (R) is the correct explanation of (A).b)Both (A) and (R) are true and (R) is not the correct explanation of (A)).c)(A) is true but (R) is false.d)(R) is true but (A) is false.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):Assertion (A): Proprietary ratio establishes relationship between proprietors fund and total assets.Reason (R): The objective of calculating proprietary ratio is to measure proportion of fixed assets financed by shareholders funds.In the context of the above two statements, which of the following is correct?a)Both (A) and (R) are true and (R) is the correct explanation of (A).b)Both (A) and (R) are true and (R) is not the correct explanation of (A)).c)(A) is true but (R) is false.d)(R) is true but (A) is false.Correct answer is option 'B'. Can you explain this answer?.
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