Which of the following indicate limitation of Financial analysis:
- AThey focus on the facts and relationships related to managerial performance, corporate efficiency etc.
- BThey does not consider price level changes.
- CThey indicate the ability of the company to meet its obligations.
- DThey provide vital information to different stakeholders.
Solution & Step-by-step Explanation
Financial analysis relies primarily on historical financial statements, which record items at historical cost. Because it ignores inflation and shifts in currency purchasing power, its failure to consider price level changes is a major limitation of traditional financial statement analysis. All other choices represent advantages or standard features of analysis.