Archive | Analysis

Making Financial Statement Analysis

The following points highlight the six main analysis made while making financial statement analysis. 1. Liquidity or Short-Term Solvency Analysis (Or Ratios): Liquidity or short-term solvency analysis aims to determine the ability of a business to meet its financial obligations during the short-term and to maintain its short-term debt-paying ability. The aim of liquidity analysis […]

5 Major Limitations of Accounting Ratios

The following points highlight the five major limitations of financial ratios. 1. Accounting ratios are based on accounting figures given in the financial statements. However, accounting figures are themselves subject to deficiencies, approximations, diversity in practice or even manipulation to some extent. Therefore, ratios are not very helpful in drawing reliable conclusions. 2. Accounting ratios […]

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