•       In first year of trading no comparative figures

•       Comparison against industry averages may not be very revealing

•       If based on historical cost, undervalued assets may distort ROCE and gearing

•       Ratios influenced by choice of accounting policy

•       May be distorted by creative accounting measures

•       Results may be distorted by inflation

•       No two companies have the same risk profile, therefore comparison is difficult

The techniques we use to interpret financial data may also be limited for similar reasons and the fact that different companies use different accounting policies for accounting for similar transactions and that the ratios themselves (e.g. gearing) have different definitions.