There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A): Analysis of financial statements is done to assess managerial efficiency.
Reason (R): Financial statement analysis helps to identify the areas where the managers have been efficient and the areas where they have been inefficient.

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Top management: The importance of financial analysis is not limited to the finance manager alone. It has a broad scope which includes top management in general and other functional managers. Management of the firm would be interested in every aspect of the financial analysis. It is their overall responsibility to see that the resources of the firm are used most efficiently and that the firm’s financial condition is sound. Financial analysis helps the management in measuring the success of the company’s operations, appraise the individual’s performance and evaluate the system of internal control.