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

Assertion(A):  The process of financial statement analysis involves re-arranging the financial information, comparison of financial data, application of analytical tools, and interpreting the data of financial analysis.
Reason(R): Financial statement analysis is carried out using analytical tools, i.e., Comparative and Common-size Statements, Ratio Analysis, and Cash Flow Statements.

Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A).

The process of critical evaluation of the financial information contained in the financial statements in order to understand and make decisions regarding the operations of the firm is called ‘Financial Statement Analysis’. It is basically a study of relationship among various financial facts and figures as given in a set of financial statements, and the interpretation thereof to gain an insight into the profitability and operational efficiency of the firm to assess its financial health and future prospects. The term ‘financial analysis’ includes both ‘analysis and interpretation’. The term analysis means simplification of financial data by methodical classification given in the financial statements. Interpretation means explaining the meaning and significance of the data. These two are complimentary to each other.Commonly used tools of financial analysis are: Comparative statements, Common size statement, trend analysis, ratio analysis, and cash flow analysis.