Users of Accounts The various users of published financial statements have different information and sos acol thered re direct there attention to different a pets of the shorit term creditors, who will be concerned with a company's liquidity, and will concentrate on the quick and current ratios. A comprehensive recent discussion of users and the ratios that correspond to their areas of interest is contained in Farmer (1986). Because the law required a company to file its accounts annually with the Registrar of Companies, all users have access to them - with a greater or lesser degree of inconvenience - and are thus in a position to calculate most of the ratios contained in this chapter. However, some users will have access to considerably more information than is contained in the financial statements - for example, the management of a company can draw on the resources of the total information system; the company's bankers may see the monthly management accounts (indeed, may even insist on the disclosure of more internal data before granting a loan or a facility); and existing suppliers have first-hand trading experience, which enables them to form certain judgements as to the financial strength or otherwise of the company. These users are fortunate in not having to rely on published information, and the necessarily imperfect and inadequate ratios based on them. It is to this last point that we devote the next section of this chapter. Some general problems of ratio analysis At various points in this chapter, we have indicated the need for caution in the use of ratios. This need is most acute when a cross-sectional analysis is employed, but considerable problems can be encountered in the external examination of the accounts of an individual entity, either for a single period or over time. The latest balance sheet available for analysis could be up to 22 months old, and even this legal limit can be extended with relative impunity: the information on which ratios are based may thus be significantly out of date. Moreover, the amount of information available will be limited by the size of the company and the reporting format it happens to adopt, thus limiting the actual number of ratios than can be calculated in some cases, and the usefulness of certain ratio in others. Finally, inflation has an insidinget. distorting effect in both the profit and loss account and the balance sheet, and attempts to in unter this erie in published accounts have bees titure cessful; the informational value of ratios must suffer as a result of this failure. When a second company is added to the analysis, the problems are compounded by the critical issue of comparability. Although the implementation of SSAPs has done much to reduce the variability in accounting treatment of a number of contentious items, it should be borne in mind that they are not uniquely or wholly prescriptive: alternative treatments are suggested in some cases, and legitimate departures are not ruled out in any technical case, if the implementation would jeopardize the 'true and fair view'. We have already referred to the problems of finding perfect 'matches' between companies in section before.. The point must be reiterated here that without a perfect match - in terms of both size and activity - invalid conclusions might be drawn from a comparison of ratios. There are a number of obstacles in the way of such comparability, not least of which is the fundamental problem of definition of industry type, which is not just a question of initial identification (Blake, 1989) gives the example of a shipping company running passenger services - is the correct classification shipping', 'travel' or 'holiday'?), but also involves the likely absence of relevant disaggregated data in the case of large companies operating in a number of different industries. There is no doubt that using ratios under the benevolent aegis of an organization such as the Centre for Interfirm Comparisons will remove much of the uncertainty, but sufficient scope for ambiguity is likely to remain, and a healthy cynicism is called for by all who use accounting ratios - with the probable (but by no means guaranteed) exception of management conducting a purely internal time series analysis.