What is the main limitation of financial analysis?
Answer & explanation
Correct answer: option 1
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.
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.