A key limitation of balance sheets in financial analysis is that: A) liquidity and solvency ratios require information from other financial statements. B) different balance sheet items may be measured differently. C) some items are recognized when they are unlikely to reflect a flow of economic benefits.

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Business

Kennedi Gill

10 April, 16:05

A key limitation of balance sheets in financial analysis is that: A) liquidity and solvency ratios require information from other financial statements. B) different balance sheet items may be measured differently. C) some items are recognized when they are unlikely to reflect a flow of economic benefits.

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Answers (1)

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Zion Hebert · Answer 1

Answer: Option (B) is correct.

Explanation:

The three limitations to balance sheets are as follow:

1.) Assets are being noted or stored at a historical cost,

2.) There is a thorough use of the estimates,

3.) There's also omission of several precious non-monetary assets.

Therefore from the given options, we can state that the key limitation of using a balance sheets under the constraints of financial analysis is that different items in a balance sheet are or may be evaluated differently.