Practicing Success
Practicing Success
CUET Preparation Today
| Which of the following is/are the limitation(s) of analysis of financial statements? |
Affected by window dressing Do not reflect changes in price level Both 1 and 2 None of the above |
| Both 1 and 2 |
| Limitations of financial analysis are: 1. Financial analysis does not consider price level changes. 2. Financial analysis may be misleading without the knowledge of the changes in accounting procedure followed by a firm. 3. Financial analysis is just a study of reports of the company. 4. Monetary information alone is considered in financial analysis while non-monetary aspects are ignored . 5. The financial statements are prepared on the basis of accounting concept, as such, it does not reflect the current position. Window dressing is a technique where a company presented its financial statements better than its actual position. The purpose of window dressing in financial statements is to attract new investors to invest in the company. Window dressing is illegal or fraudulent that usually mislead the investors. |
