Limitations of traditional financial analysis methods

1, the limitations of the source of information:

(1) the problem of timeliness of the statement data;

(2) the problem of authenticity of the statement data;

(3) the problem of the reliability of the statement data;

(4) the problem of the comparability of the statement data;

(5) the problem of the integrity of the statement data.

2, the limitations of financial analysis methods:

For the ratio analysis method, the ratio analysis is for individual indicators, the degree of synthesis is low, in some cases can not draw satisfactory conclusions; ratio indicators are generally based on the calculation of financial statements based on historical data, which makes the ratio indicators to provide information and decision-making relevance between the The relevance of the information provided by ratio indicators to decision-making is greatly reduced. For the factor analysis method, when calculating the impact of each factor on the comprehensive economic indicators, subjective assumptions are made about the order of change of each factor and only one factor changes at a time, and these assumptions are often inconsistent with the facts. Moreover, any analysis is a reflection of past economic events. As circumstances change, so do these standards of comparison. And when analyzing, analysts often focus only on the comparison of data and ignore the changes in the business environment, so that the conclusion of the analysis is also incomplete.

3, financial analysis of the limitations of the indicators:

(1) the financial indicators system is not strict;

(2) financial indicators reflect the situation has a relative;

(3) the evaluation of financial indicators is not standardized;

(4) the caliber of the calculation of the financial indicators are not consistent;

Consolidation of the above, the use of financial analysis of the limitations are mainly manifested in the three The limitations of the analysis are mainly manifested in three aspects: the limitations of the source of information; the limitations of the financial analysis method; the limitations of the financial analysis indicators. Therefore, financial analysts in the use of financial statements, the financial statements themselves must also have a process of understanding and purification. The correct application of financial analysis.