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

Assertion (A):  Analysis of financial statements using inter-firm comparisons is meaningful even if the companies follow different accounting policies.
Reason (R): Financial statements prepared on the basis of different accounting policies are comparable in spite of the financial information being not on the same basis.

Both Assertion (A) and Reason (R) are not correct.

Though financial analysis is quite helpful in determining financial strengths and weaknesses of a firm, it is based on the information available in financial statements. As such, the financial analysis also suffers from various limitations of financial statements. Hence, the analyst must be conscious of the impact of price level changes, window dressing of financial statements, changes in accounting policies of a firm, accounting concepts and conventions, personal judgement, etc. Some other limitations of financial analysis are:
1. Financial analysis does not consider price level changes.
2. Financial analysis may be misleading without the knowledge of the changes in accounting procedure followed by a firm.
3. Financial analysis is just a study of reports of the company.
4. Monetary information alone is considered in financial analysis while non-monetary aspects are ignored.
5. The financial statements are prepared on the basis of accounting concept, as such, it does not reflect the current position.