Analysis of the Limitations of Chinese Enterprises' Financial Statements and Countermeasures

Abstract

Financial statement analysis bases on financial statements and other information, using special analytical tools and methods to systematically analyze and evaluate the past and present operating results and financial position of an enterprise. It also predicts the future development trend of the enterprise and provides valuable information for decision-making to reduce uncertainty in decision-making. The current financial statements have limitations in the financial statements themselves, including the lack of non-financial information, the lagging nature of the financial statements, accounting policies, optional accounting treatments and subjective estimates by accountants. In terms of financial analysis indicators, some of the solvency indicators and operating capacity indicators have limitations. In terms of financial analysis methods, the comparative analysis method, factor analysis method and trend analysis method all have certain limitations. These limitations are discussed and analyzed in this paper. Suggestions are also made on the financial statements themselves, the indicators to be analyzed in the financial statements and the methods of financial analysis.