limitations of ratio analysis Flashcards
1
Q
a limitation
A
information contained in financial statements is historical - it happened in the past- so there is not much you can do about it
2
Q
a limitation
A
like must be compared with like- any comparisons must be made with business that are of a similar size for example tesco and asda. Not tesco and a petrol station>
3
Q
a limitation
A
findings might not take external factors into consideration such as a recession
4
Q
a limitation
A
factors such as the skill of the workforce, location of the business and skills and experience of the management team are not normally taken into account when calculating ratios
