Limitations of using ratio analysis: The information is historical, and it is too late to do anything about it Comparisons are difficult – different conditions apply in different years, and no two companies are the same Ratio analysis only covers financial information. It does not take into account any other factors such as the quality of staff or the location of the business. These may have a big influence on the performance of a business...
Limitations of using ratio analysis:
The information is historical, and it is too late to do anything about it
Comparisons are difficult – different conditions apply in different years, and no two companies are the same
Ratio analysis only covers financial information. It does not take into account any other factors such as the quality of staff or the location of the business. These may have a big influence on the performance of a business
Ratio analysis does not take into account general business condition such as inflation, and interest rates which affect the firm and the economic environment
Uses:
To compare current year’s performance with the previous year