Analysis of company performance using ratios and quantitative analysis.
What are some potential problems and limitations of financial ratio analysis?
What are some qualitative factor analysts should consider when evaluating a company's likely future financial performance.
In financial analysis, we need qualitative information and try to read between the numbers. We have to ask all the right questions. Over the years, there are some ratios, which have become more popular and handy for rule of thumb analysis of financial statements. Our purpose in this note is not deride them but to advice the reader to use them properly to derive the correct results.
Ratio analysis can also help us to check whether a business is doing better this year than it was last year; and it can tell us if our business is doing better or worse than other businesses doing and selling the same things. In ...
This solution discusses financial analysis and the potential problems and limitations of ratio analysis and also some factors analysts should take into account when predicting future financial performance. Definitions of financial analysis and explanations are included.