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What are the problems of relying on accounting ratios?

April 26, 2017Accounting Business corporations Finance problems ratios relying

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What are the problems of relying on accounting ratios?

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By nature, accounting is based on historical information. I’d say the biggest problem with relying on any accounting information is that it gives you only what has happened, but doesn’t take into account any non-quantifiable or forward looking factors in your business environment.