There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.
Assertion (A): The analysis of financial statements does not disclose the current worth of the business.
Reason (R): Financial statements are prepared on cost principles.
Answer & explanation
Correct answer: option 1
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 prospect