Question

Which of the following is not a limitation of Financial Statement Analysis?

Options

• It is affected by personal bias.

• Inter-firm comparative study possible.

• Lack of qualitative analysis.

• Ignores price level changes.

Answer 1

Inter-firm comparative study possible.

Explanation:

Making an inter-firm comparative study possible is a major advantage of financial analysis because it helps you compare different companies. The other choices (personal bias, lack of qualitative data, and ignoring inflation) are all real limitations (weaknesses) of financial analysis.