Which of the following relates to Limitations of Financial Analysis?
(A) Does not consider price level changes
(B) Qualitative aspects are ignored
(C) Assess the current profitability and operational efficiency of the firm
(D) Identify the reasons for change in the profitability of the firm
(E) Variations in accounting practices
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B) and (E) Only
(A) Does not consider price level changes — a limitation: figures are at historical cost.
(B) Qualitative aspects are ignored — a limitation: only monetary information is studied.
(C) Assess the current profitability and operational efficiency of the firm — an objective of financial analysis, not a limitation.
(D) Identify the reasons for change in the profitability of the firm — an objective of financial analysis, not a limitation.
(E) Variations in accounting practices — a limitation: changes in accounting procedures make comparison misleading.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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