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Answer» Limitations of “Analysis of Financial Statements” are : - The Financial Statements Analysis Suffers from such Limitations as Financial Statement Suffers. This Ignores the Qualitative Information like Quality of Management and Labour Force, Public Relations etc.
- The Analysis of Financial Statements do not Disclose the Current Worth of the Business.The Financial Statements of the Company are Prepared on Cost Principle.
- In many situations, Accountant has to make a choice out of various alternatives available. He may choose that alternative which may be Beneficial to the Company. In such a case , the Financial Statements are Not Free from Bias .
- Different Firms may follow Different Accounting Policies. This may Create Difficulty in Comparing the Results of Two Companies .
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