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Limitations of ratio analysis and industry average comparati

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1. Do you think there are any limitations an investor should consider when performing a ratio analysis? If so, name some of them?

2. Is it important to know the industry average rates when performing a ratio analysis on one or more companies? Why?

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This explains the limitations of ratio analysis and industry average comparations.

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I am not very accounting literate and I am not understanding how to answer these questions as I am still trying to grasp an understanding of the material. I came across these questions at the end of the chapter:

1. Do you think there are any limitations an investor should consider when performing a ratio analysis? If so, name some of them?

Ratio analysis are useful tools for evaluating solvency, profitability and liquidity of the organization. But there are certain limitations when ...

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