Which of the following indicate limitation of Financial analysis:
They focus on the facts and relationships related to managerial performance, corporate efficiency etc.
They does pot copsider price level changes
They indicate the ability of the company to meet its obligations.
They provide vital information to different stakeholders.
They does pot copsider price level changes
(2) They do not consider price level changes.
Financial analysis is based on historical cost data and does not adjust figures for changes in price levels or inflation. Therefore, the real value of assets, liabilities, and profits may be distorted over time. This makes “They do not consider price level changes” a limitation of financial analysis.