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What may make simple comparisons of financial ratios misleading?

April 26, 2017Business comparisons Finance financial Investing misleading ratios simple

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What may make simple comparisons of financial ratios misleading?

1 Answer

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1. Comparing ratios of companies in different industries. 2. Using ratios obtained from one source on one company and ratios from a different source on the other company. (The data used to compute the ratios may vary.) 3. Not looking at historical trends to see if there is a consistent pattern. 4. Not digging into the financial statements to get a true picture of how the company is doing.