Discuss two limitations of ratio analysis

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Question - Selected information for two companies competing in the catering industry is presented in the table below:

1. Account Name Lawson Dawson Current assets $110500 $167900

2. Non-current assets $250000 $299000

3. Current Liabilities $58600 $23500

4. Non-current Liabilities $89700 $145000

5. Equity $212200 $298400

6. Profit $75000 $53000

Required -

A. Calculate the following ratios for Lawson and Dawson: i. Current ratio. ii. Return on Assets (ROA). iii. Return on Equity (ROE).

B. From your calculations in part (A), explain which entity is in a more favourable position.

C. Discuss two limitations of ratio analysis as a fundamental analysis tool.

Reference no: EM132572794

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