Assertion (A): Financial Statement Analysis involves breaking down fin...
- Assertion is true because Financial Statement Analysis indeed involves breaking down financial records according to a specific plan.
- Reason is false because Financial Statement Analysis is not solely about assessing operational efficiency and growth prospects; it also evaluates profitability and solvency.
- The Reason is not a correct explanation of the Assertion as it does not directly correlate with the process of breaking down financial records.
Assertion (A): Financial Statement Analysis involves breaking down fin...
Understanding the Assertion and Reason
The assertion (A) states that "Financial Statement Analysis involves breaking down financial records according to a specific plan." This is indeed true. Financial Statement Analysis systematically evaluates a company's financial statements to derive insights about its financial health.
However, the reason (R) claims that "Financial Statement Analysis is conducted to assess a company's operational efficiency and growth prospects." While this statement is also true, it does not provide a direct explanation of the assertion.
Analysis of the Options
- Option A: Both Assertion and Reason are true, and Reason explains Assertion.
- This is incorrect because, although both statements are true, the reason does not explain how analysis is conducted.
- Option B: Both Assertion and Reason are true, but Reason does not explain Assertion.
- This option is closer to the truth, but it does not align with the correct answer.
- Option C: Assertion is true, but Reason is false.
- This is not accurate as both statements are true.
- Option D: Both Assertion and Reason are false.
- This is incorrect as both statements are true.
Conclusion
The correct interpretation of the relationship between the assertion and reason points towards Option B. Both statements are accurate; however, the reason does not serve as a direct explanation for the assertion. Financial Statement Analysis does involve a structured breakdown of records, and its purpose encompasses evaluating various facets, including operational efficiency and growth prospects, but they are not causally linked in the manner suggested.
In summary, while the assertion and reason are both valid, their relationship is mischaracterized in the assertion of Option C.