Practicing Success
Which of the following relates to Limitations of Financial Analysis? (A) Does not consider price level changes Choose the correct answer from the options given below : |
(A), (B) and (E) Only (A), (B) and (C) Only (A) and (C) Only (A), (B) and (C) Only |
(A), (B) and (E) Only |
The correct answer is Option (1) - (A), (B) and (E) Only. Financial analysis is quite helpful in determining financial strengths and weaknesses of a firm, it is based on the information available in financial statements. As such, the financial analysis also suffers from various limitations of financial statements. Hence, the analyst must be conscious of the impact of price level changes, window dressing of financial statements, changes in accounting policies of a firm, accounting concepts and conventions, personal judgement, etc. Some other limitations of financial analysis are: |