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Home Questions AHV357BKM2
Target Exam

CUET

Subject

Accountancy

Chapter

Analysis of Financial Statements

Question:

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

Assertion (A):  Intra-firm Comparision means comparing the financial data of the same firm while inter-firm comparison means comparing the financial data of two or more firms.
Reason (R): Intra-firm comparison is of financial variables taken from two independent financial statements of two firms while Inter-firm comparison is that of financial data of two or more years of the same firm.

Options:

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

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

Assertion (A) is not correct but the Reason (R) is correct.

Only Assertion (A) is correct.

Correct Answer:

Only Assertion (A) is correct.

Explanation:

The correct answer is option 4- Only Assertion (A) is correct.

Assertion (A):  Intra-firm Comparision means comparing the financial data of the same firm while inter-firm comparison means comparing the financial data of two or more firms. CORRECT. A firm would like to compare its performance with that of other firms and of industry in general. The comparison is called inter-firm comparison. 

Reason (R): Intra-firm comparison is of financial variables taken from two independent financial statements of two firms while Inter-firm comparison is that of financial data of two or more years of the same firm. INCORRECT. If the performance of different units belonging to the same firm is to be compared, it is called intra-firm comparison whereas if a firm compare its performance with that of other firms in industry, then, it is called inter-firm comparison.

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