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Ratio analysis provides a lot of information on a company regarding debt, liquidity, profitability, efficiency, per-share metrics, and relative value (Byrd, Hickman, & McPherson, 2013). However, there are potential pitfalls to using ratio analysis to measure a company. For example, comparing these numbers to the industry average might not be the best idea (Carlson, 2019). The industry average is, well, average; most people want to invest in companies that are more than even above average. To avoid this issue, potential investors should compare ratios to industry leaders instead. Another problem with ratio analysis is inflation (Carlson, 2019). Inventory depreciation is affected by inflation, so ratios, when compared over time, might not reflect what is going on with a company. To combat this issue, potential investors or financial managers should adjust the ratios to account for the inflation rate when comparing numbers over different periods. A more significant issue with ratio analysis is that ratios do not provide the why, only the what (Carlson, 2019). While doing the week five assignment, I noticed that Starbucks invested a lot of money and took on a lot of debt in 2018 (Starbucks, n.d.). This dramatic change was due to an acquisition in East China (Starbucks, n.d.). Without that information, the ratios may not make sense. Considering their assets, liabilities, income, and a bunch of other metrics dramatically changed, so did all of their ratios.