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Financial statement analysis is one of the most common financial analysis methods for firms andespecially small firms. Financial statement analysis is the use of financial or analytical tools toevaluate and compare financial statements to make business determination (My AccountingCourse 2019). In another words, financial statement analysis is an approach for debtor andinvestors to evaluate the financial statements and see whether or not the firm is healthy enough tomake investments or loans (My Accounting Course 2019).Ratio analysis is purposeless without comparisons with others. When doing industry analysis,most businesses use benchmark firms. Benchmark firms are those that are considered to be themost accurate and most critical, those that are used to compare industry average ratios (Peavler2019). Firms even benchmark different segments of the company against the same segment ofother benchmark firms.There are many limitations of financial statement analysis:1.A firm’s financial statement would be distorted by inflation A statement of financial position is a statement of a company’s financial condition at a time.Inflation may have occurred in real world but it did not reflect in the statement of financialposition. The stated values on financial statement are normally different from real values.Inflation may influence the inventory values, depreciation and earnings of the company (Peavler2019). If the inflation rate has changed in any of the periods that we analyzing, this implies thatthe figures are not comparable across periods. For instance, if the inflation rate was 100% in year