[chadhatanu]

I wanted to know the benefits and limitation of ratio analysis for the interpretation of balance sheet or other financial data

Thank y

[CliffARobinson]

Advantages:
Helpful when performing trend analysis for a company over a period

Helpful in comparing companies of different sizes

Useful as a simpler to read "Dashboard" of the company's performance


Disadvantages / Limitations:
Ratio Analysis is for understanding the financial health against past performance, not as helpful if looking for future performance.

Different accounting standards, regulations, and other market forces may skew performance comparisons between companies.