ManagementParadise.com | Management & Business Education Learning Platform

ManagementParadise.com | Management & Business Education Learning Platform (http://www.managementparadise.com/forums/index.php)
-   Financial Management ( FM ) (http://www.managementparadise.com/forums/financial-management-fm/)
-   -   LIMITATIONS OF FINANCIAL ANALYSIS (http://www.managementparadise.com/forums/financial-management-fm/202044-limitations-financial-analysis.html)

abhishreshthaa September 23rd, 2010 01:43 PM

LIMITATIONS OF FINANCIAL ANALYSIS
 
LIMITATIONS OF FINANCIAL ANALYSIS


The major limitations of financial analysis are as under:


1. Ignores the qualitative statements – Since the financial statements are concerned to the monetary matters only, the qualitative elements like quality management, quality of labor, public relations are ignored while carrying out the analysis of financial statement only.


2. Not free from bias – In many situations, the account has to make choice out of various alternatives available, e.g. choice in the method of depreciation, choice in the method of inventory valuation etc. since the subjectivity is inherent in personal judgment, the financial statement are therefore not free from bias.


3. Estimated position on ongoing concern basis – Since the financial statement are prepared on a ongoing concern basis as against liquidation basis, they report only the estimated periodic results and not the true results since the true results can be ascertained only on the liquidation of the enterprise.


4. Ignores price level changes in the case of financial areas prepared on the historical costs – In case of financial statements prepared on historical costs, the fixed assets are shown in balance sheet at historical costs less depreciation and not at the replacement value which often far higher than the value stated in the balance sheet.

Business-education July 7th, 2015 08:23 PM

Re: LIMITATIONS OF FINANCIAL ANALYSIS
 
Objectives Of Financial Analysis

1.Assessment Of Past Performance

2.Assessment of current position

3.Prediction of profitability and growth prospects

4.Prediction of bankruptcy and failure

5. Assessment of the operational efficiency

rosemarry2 April 21st, 2016 06:00 PM

Re: LIMITATIONS OF FINANCIAL ANALYSIS
 
1 Attachment(s)
Quote:

Originally Posted by abhishreshthaa (Post 417932)
LIMITATIONS OF FINANCIAL ANALYSIS


The major limitations of financial analysis are as under:


1. Ignores the qualitative statements Since the financial statements are concerned to the monetary matters only, the qualitative elements like quality management, quality of labor, public relations are ignored while carrying out the analysis of financial statement only.


2. Not free from bias In many situations, the account has to make choice out of various alternatives available, e.g. choice in the method of depreciation, choice in the method of inventory valuation etc. since the subjectivity is inherent in personal judgment, the financial statement are therefore not free from bias.


3. Estimated position on ongoing concern basis Since the financial statement are prepared on a ongoing concern basis as against liquidation basis, they report only the estimated periodic results and not the true results since the true results can be ascertained only on the liquidation of the enterprise.


4. Ignores price level changes in the case of financial areas prepared on the historical costs In case of financial statements prepared on historical costs, the fixed assets are shown in balance sheet at historical costs less depreciation and not at the replacement value which often far higher than the value stated in the balance sheet.

Hey buddy,

Please check attachment for Financial Highlights and Limitations of Financial Statements, so please download and check it.


All times are GMT +5.5. The time now is 02:26 PM.

Powered by vBulletin® Version 3.8.3
Copyright ©2000 - 2019, Jelsoft Enterprises Ltd.
Search Engine Optimization by vBSEO ©2011, Crawlability, Inc.
ManagementParadise.com is not responsible for the views and opinion of the posters. The posters and only posters shall be liable for any copyright infringement.