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Respond to… Information used in the analysis is based on past results.  Therefore, ratio analysis metrics don’t represent the future of the company. Financial statement are released periodically and there are time differences between each release.  If inflation has occurred then real prices are not reflected in the financial statements. : If the company has changed its accounting policies and or procedures, this may significantly affect the financial reports. Seasonal effects:  An analyst should be aware of seasonal factors that could potentially result in limitations of ratio analysis.  The inability to adjust the ratio analysis to the seasonality effects may lead to false interpretations of the results. References: Corporate Finance Institute [CFI]. (n.d.).  Limitations of Ratio Analysis. Retrieved from: Respond to… Analysis of the formula is all that is required when assessing a company’s financial wellbeing. Examination of the ratio is one important matter and it should not be the only examination used.  In addition, if we treat ratio analysis as the end-all decision-making answer, we are doomed to failure. The manager and analyst must be concerned with how ratios can help explain share price behavior according to Byrd (2013). Ratio analyzes are also very useful in that they can help isolate the company’s performance in a particular area such as inventory man

agement, and are easily compared with the company’s historical norms and industry (Byrd, et al., 2013).  “An analyst could easily get lost in looking at the ratios and lose track of the primary objective of financial management — maximizing shareholder wealth” (Byrd, 2013). One potential issue is the historicity of the information. storical data doesn’t mean future results will be the same. Inflation is another matter. Inflation rate may fluctuate over a period of time, and is not comparable. Companies have different procedures for the accounting. So if a company uses a reference, depending on that moment of time, it could be absolute off.  We can’t extrapolate the future precisely from that one single moment.  There’s no sense in there.  The history is not helpful.  There is no supporting information except for what is captured in that one frame. Current assets /current liabilities = liquidity ratio 14890000/9528000= Net Income 11.05 B Return on Assets 8,428 M Total Assets 194 B Return on Equity 24% Shareholder’s Equity 89,757 M Gross Profit Margin 44.72% Gross Profit 7,842 M Operating Profit Margin 17.2% Sales 53 B Net Profit Margin 16.3% Operating Profit 14868 Earnings per Share 6.27 Common Stock Outstanding 140.85 Price/ Earnings Ratio 139.14 Market Price per Share 140.93 Sales-to-Assets Sales 53 BILLION Total Assets 194 BILLION Purchase the answer to view it