What Are Some Limitations Of Financial Statements To Investors?
What information investors may need that is not provided within the financial statements?
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Financial statements are basically representatives of a business' financial activites. These are: Balance sheet, Income Statement, Statement of retained earnings and Statement of cash flows. Following are their limitations to investors:
- It is only the starting point of analysis, they donot show clearly the reasons behind a certain trend, the investors have to search and analyse by themselves.
- Past financial performance doesnot signify what will happen with the investor in future
- The financial statements are useless without the notes to the financial statements, which are complex.
- Unless the statements are audited their authenticity is under doubt and they may be misleading and fraudulent.
- It is only the starting point of analysis, they donot show clearly the reasons behind a certain trend, the investors have to search and analyse by themselves.
- Past financial performance doesnot signify what will happen with the investor in future
- The financial statements are useless without the notes to the financial statements, which are complex.
- Unless the statements are audited their authenticity is under doubt and they may be misleading and fraudulent.
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answered 8 months ago
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