Question

What strategies do propose to overcome the various limitations of financial ratios

Answer 1

Limitation of financial ratios	How to overcome
Limited comparability	Follow consistent accounting policies and practices from year to year, avoid exceptionally and extraordinary item in financial statement
Qualitative factors are ignored	Let's consider qualitative factors also
Effects of the price level changes	Adjust the ratio according to the price level changes
Effect of window dressing	Prohibit such practices as per the law particular country
There is no universal standard for comparison between firms	Fix a universal standard for each ratio for every industry
Sometimes misleading	At the time of decision making based on ratio analysis consider other faxtors too