Financial Statement Analysis Limitations

Financial Statement Analysis Limitations - Financial...

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Financial Statement Analysis Limitations Many things can impact the calculation of ratios and make comparisons difficult. The limitations  include: The use of estimates in allocating costs to each period. The ratios will be as accurate as the  estimates. The cost principle is used to prepare financial statements. Financial data is not  adjusted for price changes or inflation/deflation. Companies have a choice of accounting methods (for example, inventory LIFO vs 
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