Limitations of Ratio Analysis

All except c ratio analysis ignores quantitative factors are the limitations of ratio analysis. Based on sales the following ratio can be considered important in judging the profitability of an enterprise.

Advantages And Application Of Ratio Analysis Analysis Financial Analysis Financial Health

D Both a b 27.

. C Either a or b d Both a b Ans. A ratio of 1 is usually considered the middle ground. A Gross profit ratio.

A WCR of 1 indicates the current assets equal current liabilities. B Operating profit ratio. One of the uses of ratio analysis is to compare a companys financial performance to similar firms in the industry to understand the companys position in the market.

Since the working capital ratio measures current assets as a percentage of current liabilities it would only make sense that a higher ratio is more favorable. Obtaining financial ratios such as PriceEarnings from known competitors and comparing it to the companys ratios can help management identify market gaps and examine its.

Limitations Of Ratio Analysis Financial Analysis Accounting Education Accounting And Finance

Limitations Of Ratio Analysis Financial Analysis Accounting Education Accounting And Finance

Advantages And Disadvantages Of Current Ratio Financial Analysis Accounting Books Accounting And Finance

Advantages And Limitations Of Ratio Analysis Management Guru Financial Analysis Analysis Consulting Business