What Are The Limitations Of Financial Statement Analysis?

< p > < strong > < a > href= > http:// > www.91se91.com/news/index_c.asp > inflation > /a > < /strong > /p >

< p > because our country's financial statements are compiled according to the historical cost principle, during the period of inflation, the relevant data will be affected by price changes, so that they can not truly reflect the financial situation and operating results of enterprises, causing users' misunderstanding.

For example, the value of assets based on historical cost is certainly less than the current value of assets. The fixed cost of fixed assets purchased before 5 million yuan may now be 8 million yuan, but accounts and statements still reflect the original value of 5 million yuan of fixed assets.

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< p > if we do not know which year the asset was bought, we can not understand the scale of an enterprise correctly based on this data alone.

Further, depreciation costs are extracted from the original value of fixed assets, and profits are calculated by deducting such depreciation fees. Because depreciation fees are low, enterprises will be unable to reset the assets whose prices have risen. At the same time, because depreciation fees are low and profits are counted, it may lead to more income taxes and more profits, which may eventually make it difficult for enterprises to maintain simple reproduction.

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< p > < strong > the timeliness of information < /strong > < /p >

The data in < p > financial statements are the result of the past economic activities of enterprises.

Using these data to predict the future dynamics of enterprises is only of reference value, and is not absolutely reasonable and reliable.

And when a report user obtains various reports, it may be several days since the date of making the report.

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< p > < strong > < a > href= > http:// > www.91se91.com/news/index_c.asp > report data < /a > limit of information > /strong > /p >

< p > because of the reasons for the report itself, the data provided are limited.

For the users of the report, there may be a lot of information that needs to be used, which can not be found in the reports or notes.

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< p > < strong > reporting data < a href= "http://? www.91se91.com/news/index_c.asp" > reliability < /a > problem < /strong > /p >

< p > sometimes, in order to make the report show the company's good financial performance and business results, other means will be used to whitewash the financial statements in the accounting method.

At the moment, financial statement analysis is easy to go astray.

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< p > statement of financial statement analysis and limitations of financial statement analysis method can not negate the positive role of financial statement analysis, understand these limitations, and pay attention to their influence when analyzing the reports, so as to improve the quality of financial statement analysis.

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