Flashcards in Limitations To Ratio Analysis Deck (1)
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1
Q
Limitations to ratio analysis
A
- based on historic data
- only as good as source material
- different accounting policies can be used to calculate produce and value assets etc making comparisons difficult
- changes to organisational policies
- shouldn’t be looked at in isolation (need to look at trends)
- financial statements contain subjective elements
- need to compare to sector / trends
