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Question
Explain the limitations of analysis of financial statements.
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Solution
1. Mislead the user :
2. Not useful for planning :
3. Qualitative aspects :
4. Comparison not possible :
5. Wrong judgement
The limitations mentioned above about financial statement analysis make it clear that the analysis is a means to an end and not an end to itself. The users and analysts must understand the limitations before analyzing the financial statements of the company.
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