A limitation in calculating ratios in financial statement analysis is that
A) it requires comparisons.
B) no one other than management would be interested in them.
C) some financial statements contain many estimates.
D) they seldom identify problem areas in a company.

Question

Quizplus · Accepted Answer

Ratios in financial statement analysis often rely on figures that include estimates, such as depreciation or allowances for doubtful accounts. These estimates can introduce variability and uncertainty into the ratio analysis, making it a limitation.

A Limitation in Calculating Ratios in Financial Statement Analysis Is