Limitations of financial statements and ratio analysis when assessing business performance (financial and non-financial factors)
Financial statements and ratios only tell part of the story about a business. They miss important factors — like staff quality or brand reputation — that numbers alone cannot capture.
Real World
Tesco's 2014 accounts overstated profits by £263 million — yet ratios calculated from those figures would have looked healthy, illustrating how creative accounting can make ratio analysis meaningless.
Exam Focus
For 'evaluate' questions, pair every financial limitation with a specific non-financial factor to access top-band marks.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
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