Compute, Interpret, Anaylze the limitation o

F/S Ratios
Calculate the trend percentages from the
following figures of sales, stock, and profit of
Harshit Ltd., taking 2001 as the base year.
Limitations of Financial Analysis
1. While doing the financial analysis, firms often fail to consider
the price changes. When firms compare data from various time
periods, they do it without providing the index to the figures.
Hence, the firm does not show the inflation impact.
2. Intangible assets not recorded. Firms do not record many
intangible assets. Instead, any expenditure made to create an
intangible asset are immediately charged to expense.
3. Firms consider only the monetary aspects of the financial
statements. They do not consider the non-monetary aspect.
4. Firms prepare the financial statements on the basis of on-going
concept, as such, it does not reflect the current position.
5. The statements do not necessarily provide any value in
predicting what will happen in the future.