Ratio analysis plays a crucial role in exhibiting the financial status and strength of an organisation. Although the ratio analysis is a potent tool for the management yet flawed with certain limitations which are follow:

(1) False Results: Ratio are based on financial details if the statistics and figures contained in the details are not true and exact so are the ratio based on them. Which lead to the wrong inferences. 

(2) Lack of Standard Universally Accepted terminology: Different words have different meanings as several companies consider profits prior to taxation and some consider profit after deducting interests and taxes.

(3) Ignoring Qualitative factors: Ratio analysis is a parameter or measuring yard stick for a business execution. It tries to qualitative factors and tends to explain the ratio is a measuring device to see the operational efficiency of a venture. 

(4) One sided analysis: Ratio analysis is a one sided phenomenon which provides only one aspect of the desired information. Therefore the micro analysis of the financial statements must be coupled with others analytical processes by exporting the ratio factors. 

(5) A single product ratio is inadequate in providing meaningful information and in order to understand any exact position a multidimensional analysis of ratios is needed. 

(6) Limited Comparability: The result of two organisations are comparable but it is possible only when the accounting procedures a comparative study is not feasible.