Discuss at least three potential issues in utilizing ratio analysis that you would share with your colleague.

1. Incorrect Ratios: The results of ratios are often misleading when the data used in their calculation is inaccurate or flawed. For example, a company’s liquidity ratio may look good on paper but could actually be inflated due to incorrect inventory data or other related issues that have been neglected when gathering information for the analysis.

2. Comparisons are limited: Because of the differences in accounting standards and methods used by different organizations, there can be discrepancies when comparing reported ratios.

3. Uncertain Interrelationships : Analysts may find it difficult to take informed decisions solely based on the results of ratio analysis, as they do not always lead to one another.