Given below are two statements:
Assertion (A): To evaluate financial proposals, detailed calculations of earnings, earnings per share, interest, taxes and dividends are made.
Reason (R): In financial plans, the more risky the investment, the lower the returns it is likely to give.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A) is true but (R) is false.
Assertion (A): To evaluate financial proposals, detailed calculations of earnings, earnings per share, interest, taxes and dividends are made. — True. Financial proposals are weighed by working out their earnings and costs in detail.
Reason (R): In financial plans, the more risky the investment, the lower the returns it is likely to give. — False. The risk-return trade-off works the other way. The more risky the investment, the higher the returns it is likely to give.
NCERT (2026-27 Edition): “(iv) Evaluating alternative courses: The next step is to weigh the pros and cons of each alternative. Each course will have many variables which have to be weighed against each other. The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved. In financial plans, for example, the risk-return trade-off is very common. The more risky the investment, the higher the returns it is likely to give. To evaluate such proposals detailed calculations of earnings, earnings per share, interest, taxes, dividends are made and decisions taken.” |