Which of these are limitations of financial analysis?
I. The past is an imperfect guide to the future
II. Historical cost financial reports are not adjusted for inflation
III. Non-quantitative factors are not considered
IV. Ratio results often contain errors in calculations
V Comparisons may not be valid
A) I, II, III, V
B) I, II, IV, V
C) II, III, IV, V
D) I, III, IV, V

Question

Quizplus · Accepted Answer

I. The past may not always be a reliable guide to the future as changes in the business environment can affect future performance in unforeseen ways.
II. Historical cost financial reports do not take into account the effects of inflation on the value of assets and liabilities.
III. Non-quantitative factors such as management expertise, employee morale, and brand recognition are not considered in financial analysis.
V. Comparisons between companies or industries may not be valid due to differences in accounting practices or business models. 
IV is not a limitation of financial analysis as long as the calculations are properly checked for accuracy.

Which of These Are Limitations of Financial Analysis