EN
Companies compete nowadays in a changeable and turbulent environment. Their financial standing may change rapidly. Each enterprise may find itself on the verge of bankruptcy. Hence it is very important to evaluate and constantly monitor the financial condition of companies. It facilitates management and allows managers to make right decisions. If they do not know the current situation of the business, they will not be able to manage it effectively. Financial ratios supply information necessary to analyze financial condition and performance of companies. In spite of all their merits, financial ratios have also many flaws, of which a managers should be aware (e.g. they may be calculated in different ways, some of them are capable of manipulation and their comparisons may be misleading). Therefore there is a need to make managers familiar with all the problems connected with the application of financial ratios and offer possible solution to some of these problems. Lack of information is sometimes better then having wrong informa- tion, which may lead to wrong decisions. The correct interpretation of financial ratios is not an easy task. It requires the appropriate and all-embracing knowledge about them and their properties. As managers and financial analysts should be aware of all the problems connected with application of financial ratios, authors of this article want to present the shortcomings and limitations of using financial ratios to assess the financial situation and performance of companies.