Analysts must always be vigilant about the possibility that accounting distortions are present and complicate the interpretation of financial ratios,percentage relations,and trend indices.

Analysts need to be cautious about accounting distortions that can impact their interpretation of financial ratios, percentage relations, and trend indices. These distortions can arise due to various reasons, such as aggressive accounting policies, financial statement fraud, or errors in financial reporting. Therefore, analysts need to carefully scrutinize the financial statements, assess the quality of earnings, and look for any red flags or inconsistencies that may indicate the presence of accounting distortions. Ignoring such distortions can result in incorrect valuation, investment, or credit decisions, leading to adverse outcomes for stakeholders.