68 291
Assignments Done
Successfully Done
In November 2018

Answer to Question #53171 in Accounting for habiba

Question #53171
Discuss the limitations of financial ratios in using them to evaluate business.
Expert's answer
There are limitations of financial ratios. There is a significant art in the interpretation of ratios.
1) Ratios are only as informative as the financial statements on which they are based.
2) Ratio analysis is probably most accurate for organizations with a narrow line of products or services.
3) Inflation can distort the financial statements.
4) With some ratios it is difficult to tell where a ratio value changes from “good” to “bad.”
5) It is sometimes very difficult to draw overall conclusions about an organization using ratios alone.
6) Differences in accounting assumptions may make it difficult to compare ratios from different organizations.
7) Differences in ratio definitions may make it difficult to compare ratios from different sources.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!


No comments. Be first!

Leave a comment

Ask Your question

Privacy policy Terms and Conditions