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    lianchik's Avatar
    lianchik Posts: 1, Reputation: 1
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    #1

    Apr 21, 2008, 07:50 PM
    Financial Ratios
    I need help to understand why financial ratios can be misleading.
    pal_g3's Avatar
    pal_g3 Posts: 15, Reputation: 1
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    #2

    Dec 15, 2010, 02:52 PM
    They can be misleading because ratios have some problems such as lack of benchmark, different sizes of the firm in comparison, different accounting methods adopted by different companies, the negative numbers of ratios etc.
    Ratios contain income statement and balance sheet numbers, while the income statement is based on the whole fiscal yr and the balance sheet pertains to a date. So its misleading in many ways. Also the figures can be changed to present high or low ratios by the management so the window dressing maybe also present there.
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