Define ratio analysis and its limitations

What can managers and investors learn from ratio analysis? What are the limitations of ratio analysis?

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... operations. Credit analysts (bankers and bondholders) analyze ratios to help judge a company's ability to pay its debts. Stock analysts (stakeholders) are mainly interested in a company's efficiency, risk, and growth prospects.

Referencing "Stakeholder Model 3 - Financial Ratios" within "Updates and Handouts." I will attempt the review the limitations of ratio analysis as it relates to investors.

Financial Ratios and Stakeholders

Stakeholders' primary focus is to evaluate a company from the perspective of the financial stakeholders - stockholders, bondholders, and bankers (stakeholder Model 3).

Income Statement: ...