Does Not Account for Market Value
• It is historical cost-based and does not reflect the present market value of assets or liabilities.
Lacks Qualitative Analysis
• It focuses solely on quantitative aspects and fails to account for non-monetary factors such as employee morale or brand reputation.
Static
• It gives a snapshot of the financial position of a company at a particular point of time and does not show any trends or changes over time.
Complexity in Large Organizations
• For companies with diverse operations, the equation becomes more complex, requiring advanced accounting techniques.