Question

Write short notes on Drawbacks of Ratio Analysis.

Answer 1

Drawbacks of ratio analysis

Limitations of Ratio Analysis:

False Results if Based on Incorrect Accounting Data.

No Idea of Probable Happenings in Future.

Variation in Accounting Methods.

Price Level Changes.

Only One Method of Analysis.

No Common Standards.

Different Meanings Assigned to the Same Term.

Ignores Qualitative Factors.