Limitations

It may, however, be pointed out that the concept of capital output ratio suffers from certain limitations. Its precise calculation presents some formidable difficulties. Hence , the quantitative relationship between capital output ratio suggests, may prove to be misleading. It would, therefore, be hazardous to base the estimates of capital requirements of an industry or economy of such ratios neither can the capital stock be assessed with any exactitude none is the other side of the ratio output capable of any precise measurement besides the index number problems. A clear distinction cannot be often made between capital goods and non capital goods. Returns to social overheads . In particular, cannot be calculated accurately.