WAEC Accounting 2015 Theory — Question 7
Question 7 of 13 from the West African Examinations Council (WAEC) Accounting 2015 Theory paper, with the correct answer and a full explanation.
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3(b). Outline: (i) Three uses of accounting ratios; (ii) Two limitations in the use of account ratios.
Model answer
(i) Uses of accounting ratios: For investment decision on part of investors; For management decision making; For comparison of performance horizontally and vertically (i.e. year-on-year and against other firms). (ii) Limitations of ratios: (a) They are technical for a layman to interpret; (b) They do not account for changes in value of money (inflation).
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