Ratio analysis is just a technique for making judgement nit a substitute for judgement
Answers
Answer:
It is very difficult to ascertain the standard ratio in order to make proper ... Ratio analysis is not a substitute for sound judgement. But ratios are tools to aid in applying judgement
Answer:
Ratio analysis is only a beginning and gives just a fraction of information needed for decision-making. It is just an aid and cannot replace thinking and personal judgment employed in the decision-making process.
Explanation:
Differences in Definitions:
Comparisons are made difficult due to differences in definitions of various financial terms. Lack of standard formula for working out ratios makes it difficult to compare them. They are worked out on the basis of different items in different industries.
Limitations of Accounting Records:
Ratio capital is based on financial statements which are themselves subject to limitations. Thus, ratios calculated on the figures given in the financial statements, also suffers from similar limitations.
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