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What Can Distort the Picture?

April 13, 2006

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Your financial statements and ratio analysis may not always give a true picture of the condition of your business and how you stack up against other businesses. Various factors can distort the picture.

The major causes of distortions in the income and performance pictures presented by the financial statements are:

• inflation
• different accounting treatment for the way in which items are reported

Unless the impact of these factors is considered, a false picture of the condition of the business may emerge.

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