Question

describe atleast ten limitations of financial statements analysis

Answer 1

Answer financial Statement Analysis means the analysis of the Fimosa) statements._made_by the company. Fingo 419/ Statement includes Galanse Sheet, Income Statement, Gsh-flow Statement, etc. - V It will become a good thing for a business to analyse such stylements because the stakeholders will rely on operations of business, Limitations of financial Statement Analysis 11 ||(1) Fingacial_Data is badly dislovted by Jaflaljon_ - The value of items recorded in Hingocial stylement is on historical cost basis. Due to inflation such values are affectes They are recognized on a lower cost than the true fair value. || (2) Different_Accounting Policies available There are various accounting policies quailable such as for inventory recording at the year end FIFO (first - 11fins l_044) Lifo Clast-in- first out? Weighted Average, etc for Depreciation straight line Metheday Declining oqlance Method, et.com 16). Diversified Prodydt liges - Mggy business offered different product liges. It is dificult to take a correct track of divisions of product 14) Change in accountnag Methoils Due to Avotilability of different accounting policies, business Moj seleck such accounting polisles which are benchicial for the business such change will quoid the goverment regulations...

(5). Chugger_is_Gamment_Rules and Regulations Ambusthers who come across the various threshold linik of velles and regulations has to keep update of rech updated vylex. It will be compullovy requirement for the - Management to prepare financial_statements 25 per such --applicable eles and vegulations (6) Not Proper Estination of Expenses and window Dressing - Te show low q moynt of income to the Government, aq_149 palopuigle estimation of expenses made to show tesis income All the practices of window dressing are kept in mind while 999lysting fina949 statement Non Discussion on Non - Financial Data financial Statements Analysts do not provide a discussion on the non-fingocial dala Environmental issuer, Payroll information, political Affairs are the affairs should be taken into account. to (8) Inappropriate Jydgemeals Sometimes an unsound judgements are taken from the mengaumgefla. Such judgements will affect the fingosial position as well qo performance of the bysiness Negative Balances Non Disclosure of various income to the business leqtr to the negative balances in the accounts like cash capital etc. It will creple bat impact on the stakeholders _ while revipolay the skytements

(10) Not verified Financial Statements If In that situation, it is business. are not verified by difficult to rely on a a professionals operations of