What are the limitations of the ratio analysis of accounting statements?

The limitations of the ratio analysis of accounting statements are as follows:

1. The data mainly comes from past events.

The accumulation of economic business. The data on which the two methods are based is accounting data, which is the result and summary of the past economic activities of the enterprise, and is only of reference value for controlling the present and predicting the future financial analysis for the enterprise to make some decisions.

2. The data may not reflect the real situation.

Financial statements are compiled according to accounting standards and norms, but they may not fully reflect the objective reality of enterprises. Based on the analysis of these data, it is easy to produce "false statements that are really analyzed" or contain human factors, and the statements reflect the wishes of managers. Can not truly analyze the financial situation and operating results of enterprises.

3. There are differences in accounting data of similar economic businesses. For the same economic business, different enterprises can choose different accounting procedures, and different operators in the early and late stages of the enterprise have different calculation methods, so the data have different interpretations, and the data itself has certain differences, so it cannot be "dead" analyzed.

4. Data has defects in information transmission. The data and accounting information reflected in accounting statements are limited, and the expression content of information is bound to be large-scale, which will inevitably affect the accuracy of analysis results.

5. These two analytical methods have their own limitations. The two analysis methods can only provide limited information, and the data formed by the business of the enterprise is complex, so the analysis can only answer "what" but not "why". It is difficult to accurately judge the overall operation of an enterprise only by the results of analysis.

After understanding these limitations of comparative analysis and ratio analysis, we should pay attention to their adverse effects when using these two methods in order to improve the quality and effect of financial analysis.