Benefits and limitations of Financial Decision making

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  • Financial Decision Making
    • Limitations
      • Ratio analysis info is historic-not current
      • Does not take into account external factors
        • Eg. Recession
      • Fails to measure human elements of a firm
      • Only used for comparison with other firms of the same size and type
      • Difficult to compare w other businesses as they may not want to share info
    • Benefits
      • Help compare firms performace w similar competitors
      • Ratios help compare current performance with previous
      • Help monitor and identify issues that can be resolved
      • Help w future decision making
      • Highlight areas for future investigation


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