Describe potential limitations of ratio analysis

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Explain the questions please.
Describe potential limitations of ratio analysis.
Analyse the types of market research that Show-off Ltd can undertake to
support their expansion decision.
Discuss whether the present financial position of Show-off Ltd justifies
the CEO's planned expansion.
2004 2005 2006
Sales revenue $42m $62m $98m
Current ratio 1.8 2.2 2.4
Acid test ratio 1.4 1.1 0.8
ROCE 12 % 16 % 22 %
Gross profit margin 42 % 44 % 45 %
Net profit margin 11 % 9 % 8 %
Rate of stock turnover 25 times 30 times 38 times
Gearing ratio 40 % 40 % 70 %

Reference no: EM13686714

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