Ratio analysis merely directs the analyst to potential areas of concern; it does not provide conclusive evidence as to the existence of a problem.

Question

Quizplus · Accepted Answer

Ratio analysis is a useful tool to identify potential areas of concern and assess the financial performance of a company. However, it only provides a snapshot of the financial health of the company and does not give conclusive evidence of the existence of a problem. Further analysis and investigation are required to confirm the concerns raised by ratio analysis.

Ratio Analysis Merely Directs the Analyst to Potential Areas of Concern;