Question

How does 'Subjectivity' become a limitation of financial statement analysis? Give example by writing a brief business story.

Answer 1

Explanation:

The analysis of financial statements will not yield comparable results unless the price level changes are taken into account. Personal ability and bias of analyst : Influence of personal judgement also affects the analysis and interpretation of financial statement, as it is done by human beings.

Missing: business ‎story.

Answer 2

Answer:

Subjective means using personal judgement in selecting the methods of accounting treatment from the alternatives available, i.e., choice in the method of depreciation or choice in the method of inventory valuation. Since the subjectivity is inherent in personal judgement the financial statements are not free from bias.

Explanation:

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