Page 44 - FINAL CFA I SLIDES JUNE 2019 DAY 7
P. 44

Session Unit 7:

                                                                                              25. Understanding Balance Sheets

         LOS 25.h: Calculate and interpret liquidity and solvency ratios., p. 94















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          Analysts must understand the limitations of balance sheet ratio analysis:

          • Comparisons with peer firms are limited by differences in accounting standards and
              estimates.

          • Lack of homogeneity as many firms operate in different industries.

          • Interpretation of ratios requires significant judgment.
          • Balance sheet data are only measured at a single point in time.
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