alleryA key limitation of financial statement analysis is that it:
Aremoves all accounting bias
Beliminates the need for judgement
Calways predicts the future accurately
Dis largely based on past, historical data
Answer & Solution
Correct answer: D. is largely based on past, historical data
Financial analysis relies on historical statements, a key limitation, since past figures may not reflect the future or price-level changes.
Keep practising Analysis of Financial Statements
Browse all Analysis of Financial Statements questions for AP Intermediate 2nd Year, or explore more Accountancy topics.
Related questions
An investor divides profit available to common shareholders by the shares outstanding. ThaThree profitability measures are named together: return on total assets, return on equity A manager wants to know how hard the asset base is working to produce sales. She should usOperating efficiency ratios include total asset turnover, inventory turnover, days' sales A ratio checks whether a firm can cover its interest expense as it falls due. That ratio iTwo ratios are named for assessing solvency: debt-to-equity and:Lenders often look at the ratio built on the single most liquid asset a company holds. ThaA stricter test strips inventory and prepaid expenses out of current assets. That test is