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What is Limitations of Financial Ratio Analysis about?

Financial ratio analysis has several limitations: it examines past rather than future performance, relies on accounting rather than economic data, and fails to capture important off-balance sheet items. Ratios can also be manipulated through accounting policy choices and reflect historical rather than current economic values. Cash flow measures have been shown to correlate more closely with stock prices than income-based ratios.

Author

gaganlumba

Language

EN