Discuss limitations of ratio analysis, Financial Accounting

Assignment Help:

Question :

Financial analysts will use ratios to compare performance of companies in the same industry.

Lenders will frequently use ratio analysis to help them decide whether to lend to an individual in the first place and whether to continue their financial support. Business owners and managers also use ratios to assess the financial performance of their business. Such ratios may include earnings per share, interest cover, gearing and net profit margin.

Required:

(a) Explain the usefulness of ratios analysis to the above named users of accounts making reference to the three dimension of financial performance.

(b) As a potential shareholder indicate the ratios which will be of interest to you and the direction of these ratios.

(c) Discuss four limitations of ratio analysis.


Related Discussions:- Discuss limitations of ratio analysis

What two components are used to compute the return on assets, What two comp...

What two components are used to compute the return on assets ?

Half secret trusts-secret trusts-trusts laws and accounts, Half secret trus...

Half secret trusts In this type of trust the will states that the gift is on trust, but the name of the beneficiary is not specified. Since the existence of a trust is disclose

When youre using accounting software, when youre using accounting software ...

when youre using accounting software why would you use hot keys and shortcuts a.to quickly access commands b.to input data for you c.to start the program d.to write checks

Extent of tests of control, Extent of Tests of Control -Every year AUDITOR ...

Extent of Tests of Control -Every year AUDITOR should obtain sufficient evidence about whether company's internal control over financial reporting, including controls for all inter

Maximize revenues from sales, You are a manager at the DaimlerChrysler. Dai...

You are a manager at the DaimlerChrysler. Daimler-Chrysler has lost money on the Smart car since the first model rolled off the assembly line in 1998. By bringing its little car in

How useful is accounting information, How useful is accounting information?...

How useful is accounting information? No one would seriously claim that accounting information fully meets all of the needs of every various user groups. Accounting is still a

accounting, what organizations are responsible for governing financial rep...

what organizations are responsible for governing financial reporting? what is the role of each organiztion? how have the roles changed in the last 20 years? how might their roles c

Partnership, in the absence of no agreement in partnership discuss and expl...

in the absence of no agreement in partnership discuss and explain the provision of partnership act

Prepare journal entries to record the borrowing, On December 1, 2013, Colon...

On December 1, 2013, Colonel Wilder borrowed $400,000 at 12% interest and pledged $500,000 in accounts receivable as collateral. Additionally, Colonel Wilder was charged a finance

Accounting for partnerships, Accounting for Partnerships The owners’ in...

Accounting for Partnerships The owners’ interests in the business are divided into long term and short-term interests. (Long-term interests refer to original capital commitment

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd