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Accounting - Coggle Diagram
Accounting
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Limitation of Ratios
Different businesses may calculate accounting figures differently. Therefore, comparing ratios might not always be accurate.
Ratios give a limited picture of a business as they only show financial information. Other important insights, e.g., staff morale, good industrial relations, are not reflected in the calculations.
Ratios analyse historical (past) figures only. They may not be true indicators of future performance.