The following independent scenarios and questions are provided, which focus on the limitations of ratio analysis.

Required:
Consider each scenario and answer the specific related question.
1. A lender is considering providing a loan to a private company, Company A. Company A has provided consolidated comparative three-year financial statements prepared in accordance with ASPE for the parent company, Company X, and its three subsidiaries, Company A, Company B, and Company C. What would be the challenge of the receipt by the lender of consolidated financial statements?
2. An analyst is assisting a small corporate investor to decide between two investments. The financial statements for both potential investments have been provided, both audited and in accordance with IFRS for 20X1-20X4. The analyst notes that one of the companies has large gains from the sale of investments in 20X2 and 20X3. The analyst also notes that the other company has a sizable shareholder loan in 20X3 and 20X4. Both companies report deferred income tax assets. Is any special treatment required for any of these observations
by the analyst?
3. An investor obtains an analyst report outlining a potential investment in Miral Corporation, a small public company that operates in the automotive industry. The analyst provides a ratios for the past 5 years with industry comparisons. In all years, Miral Corporation outperforms the industry. What limitations are there with the comparison to the industry?
4. A lender needs to analyze the financial statements of Tootum Corp. In order to decide how much debt to extend to the company. Tootum’s controller offers not only to provide the financial statements in accordance with ASPE but to prepare solvency ratios for the analyst. The controller has suggested that the lending process would be more efficient this way.
The junior financial analyst at the lending agency agrees and makes her lending decision based on the ratios prepared by the controller. What has the analyst possibly overlooked?