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

Assertion (A):  Financial Statement Analysis is a systematic process of analyzing financial data for easy understanding and decision-making.
Reason (R): Financial Statements are analyzed using analytical tools such as Comparative Statements, Common-size Statements, Ratios, and Cash Flow statements.

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

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.