Accounting · Financial Ratio Analysis
Which of the following is a recognized limitation of financial ratio analysis?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Ratios can be easily distorted or rendered misleading due to accounting policy changes or window dressing.✓
- 2Ratios provide autonomous conclusions without requiring comparison to historical or sector benchmarks.
- 3Ratios eliminate the accounting impact caused by distinct industry-specific structural variations.
- 4Ratios provide completely real-time, forward-looking predictive corporate financial performance indicators.
Correct answer
Ratios can be easily distorted or rendered misleading due to accounting policy changes or window dressing.
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