You work as an analyst at a credit-rating agency, and you are comparing firms in the construction and engineering sector. One company in the portfolio of companies you are analyzing is a Chinese firm. This firm stands out in the ratio analysis, because the company’s financial ratios are substantially lower than identical financial ratios of the other firms in the sector. You do not dissect the results of the ratio analysis and categorize report this firm as an under-performing company.
Which of the following statements about your analysis report is true?
– The analysis likely includes incorrect and misleading conclusions.
– The ratios provide an accurate and thorough representation of the Chinese company’s performance.
Which of the following represents weakness or limitation of ratio analysis ( check all that apply )
weakness dressing might be in effect,
market data not sufficiently considered,
seasonal factors can distort data