All of the following are limitations of financial ratio analysis except for:
A) suitable yardsticks may not be available with which to compare results.
B) year-end data is not necessarily typical of the position during the year.
C) excessive information is being disclosed in company annual reports.
D) it is the past performance that is being analysed.

Question

Quizplus · Accepted Answer

Excessive information being disclosed in company annual reports is not a limitation of financial ratio analysis, but rather a potential benefit as it provides more information for analysis. The limitations of financial ratio analysis include the potential lack of suitable comparatives, the potential for year-end data to not be representative, and the fact that it is past performance that is being analyzed.

All of the Following Are Limitations of Financial Ratio Analysis