Practice Limitations of Ratio Analysis - 19.4 | 19. Financial Statement Analysis – Ratio Analysis | Management 1 (Organizational Behaviour/Finance & Accounting)
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19.4 - Limitations of Ratio Analysis

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What does historical data dependence mean in ratio analysis?

💡 Hint: Think about how past figures may or may not represent current reality.

Question 2

Easy

What is window dressing?

💡 Hint: Consider why a company might want to look more profitable.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What is one major limitation of ratio analysis?

  • It provides real-time data
  • It depends on historical data
  • It is universally applicable

💡 Hint: Think about how useful past data is in predicting the future.

Question 2

True or False: Window dressing is a legitimate way to improve financial statements.

  • True
  • False

💡 Hint: Consider if altering facts to look better is acceptable.

Solve and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

You are analyzing a tech startup that has shown massive growth in revenue in recent years, but their net income has been unstable. Discuss how historical data dependence might affect your analysis.

💡 Hint: What factors might affect their stability in the future?

Question 2

Consider two companies with identical liquidity ratios but operating in different industries. Discuss how differing accounting policies might impact your analysis.

💡 Hint: What determines 'normal' for each industry?

Challenge and get performance evaluation