please do not post to website:1. When analyzing a company's performance, what are some of the problems of relying on ratio analysis only?2. How does sinking fund provision impact the value of a...

QUESTION 1:
When analyzing a company's performance, what are some of the problems of relying on ratio
analysis only?
SOLUTION 1:
The ratio analysis is considered as one of the important tool for evaluating the performance of
the company. But it suffers from certain disadvantages like it explains the relationship about the
past data only. The investors are more concerned about the current trends and future prospects of
the company. The ratio analysis is not very helpful in comparative analysis as it is based on the
financial accounting information. The financial accounting information is affected by the various
estimates and assumptions, which are different for different companies. The environmental
conditions like regulations, market structure are different for every company and thus, ratio
analysis can sometimes provide the misleading results....