What is a limitation you should mention when preparing a ratio analysis report regarding data quality?

When preparing a ratio analysis report, noting that the quality of provided data affects analysis quality is essential. This is because the insights derived from ratio analysis are heavily dependent on the accuracy and reliability of the underlying data. If the data is flawed, incomplete, or misreported, the ratios calculated from that data may lead to misguided conclusions or incorrect assessments of a business's financial health. High-quality data enables meaningful comparisons and interpretations; conversely, poor-quality data can obscure true performance and misinform decision-making processes.

Recognizing that data quality directly impacts analysis emphasizes the need for thorough data verification and validation before conducting any ratio analysis. Stakeholders need to be aware of potential data limitations to appropriately interpret the ratios and the overall financial condition they aim to analyze.