Which of the following is NOT the limitation of financial statement analysis of a company?
Answer & explanation
Correct answer: option 4
Financial Statements are helpful in identifying the financial weakness of a firm.-It is importance of Financial Statements.
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.