A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis:

Abstract This paper provides a critical review of the theoretical and empirical basis of four central areas of financial ratio analysis. The research areas reviewed are the functional form of the financial ratios, distributional characteristics of financial ratios, classification of financial ratios, and the estimation of the internal rate of return from financial statements. It is observed that it is typical of financial ratio analysis research that there are several unexpectedly distinct lines with research traditions of their own. A common feature of all the areas of financial ratio analysis research seems to be that while significant regularities can be observed, they are not necessarily stable across the different ratios, industries, and time periods. This leaves much space for the development of a more robust theoretical basis and for further empirical research. Keywords: Financial statement analysis, financial ratios, review Acknowledgments: Our thanks are due to Manuel Garcia-Ayuso Covarsi of the University of Sevilla, Spain, for his constructive comments. Published as Timo Salmi and Teppo Martikainen (1994), "A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis", The Finnish Journal of Business Economics 4/94, 426-448. Also published on the World Wide Web as http://www.uwasa.fi/~ts/ejre/ejre.html

Abstract: This paper outlines a financial statement analysis for use in equity valuation. Standard profitability analysis is incorporated, and extended, and is complemented with an analysis of growth. The perspective is one of forecasting payoffs to equities. So financial statement analysis is presented first as a matter of pro forma analysis of the future, with forecasted ratios viewed as building blocks of forecasts of payoffs. The analysis of current financial statements is then seen as a matter of identifying current ratios as predictors of the future ratios that drive equity payoffs. The financial statement analysis is hierarchical, with ratios lower in the ordering identified as finer information about those higher up. To provide historical benchmarks for forecasting, typical values for ratios are documented for the period 1963-1996, along with their cross-sectional variation and correlation. And, again with a view to forecasting, the time series behavior of many of the ratios is also described and their typical "long-run, steady-state" levels are documented.

Abstract:
Background The purpose of this study was to estimate both cross-sectional sibling recurrence risk ratio ( s) and lifetime s for the metabolic syndrome and its individual components over time among sibships in the prospectively followed-up cohorts provided by the Genetic Analysis Workshop 13. Five measures included in the operational criteria of the metabolic syndrome by the Adult Treatment Panel III were examined. A method for estimating sibling recurrence risk with correction for complete

ascertainment was used to estimate the numerator, and the prevalence in the whole cohort was used as the denominator of s. Results Considerable variability in the s was found in terms of different timepoints for the cross-sectional definition, the times of fulfilling the criterion for lifetime definition, and different components. Obesity and hyperglycemia had the highest cross-sectional s of the five components. Both components also had the largest slopes in the linear trend of the lifetime s. However, the magnitudes of the lifetime s were similar to that of the mean cross-sectional s, which were <2. The results of nonparametric linkage analysis showed only suggestive evidence of linkage between one marker and lifetime diagnosis of low high-density lipoprotein cholesterol and metabolic syndrome, respectively. Conclusion The s of the metabolic syndrome and its components varies substantially across time, and the s of lifetime diagnosis was not necessarily larger than that of a cross-sectional diagnosis. The magnitude of s does not predict well the maximum LOD score of linkage analysis. Financial Ratio Analysis Ref: 9A85K031 Author(s): Richard H. Mimick Financial ratio analysis is used to evaluate the financial performance and condition of a business enterprise by measuring its progress towards financial goals. Its purpose is to provide information about the business entity for decision-making by both external and internal users. Terminology, definitions, and formulae (for vertical analyses, return on investment, investment utilization ratios, liquidity ratios, stability ratios, and growth ratios) are given in this technical note, and

applied in a short exercise. This note would be suitable for a class in introductory finance. Keywords: Financial Analysis Level of difficulty: 1 - Introductory Industry and settings: - Financial Analysis - 27 page(s) Event year end: Non applicable

Financial ratio analysis Article Abstract: Companies listed on the UK stock market have to issue financial reports from which a number of ratios can be calculated. Performance ratios include return on capital employed, and stock turnover. Liquidity ratios relate to cash flow, while financing ratios relate to gearing. Financial ratio analysis can be misleading on its own. Performance ratios vary from one industry to another. The value of a brand may be included in a balance sheet. The methods that companies use to compile their accounting data are important for successful financial analysis.

Author: Healey, Nigel Publisher: Longman Group Ltd. (UK) Publication Name: British Economy Survey

Subject: Business, international ISSN: 0263-3523 Year: 1997 Analysis, Finance, Corporations, Financial analysis, Corporate finance, Corporation reports, Company reports

Read more: http://www.faqs.org/abstracts/Business-international/Financial-ratioanalysis-From-financial-investor-toentrepreneur.html#ixzz1VOBmRbkD

Abstract
In this paper, we compare ratio analysis with the data envelopment analysis approach. It is shown that using ratio analysis implies that a one multidimensional space is projected onto other subspaces many times. As a result, significant distortion of the performance assessment of units takes place. Our theoretical results are validated by computational experiments on the data taken from financial accounts of Russian banks. Key words efficiency analysis ratio analysis

DEA 1. V. E. Krivonozhko* + Author Affiliations 1.

*

Corresponding author: krivonozhkoVE@mail.ru

1. A. A. Piskunov and 2. A. V. Lychev + Author Affiliations 1. Systems Optimization Laboratory, Institute for Systems Analysis, Moscow 117312, Russia 2. Accounts Chamber of the Russian Federation, Moscow, Russia Received October 29, 2009. Accepted January 25, 2011

Financial Analysis with reference to Ratio Analysis

Economics & finance | Finance | Term papers | 08/25/2009 | .doc | 14 pages Synopsis abstract : Nature of financial statements. Importance of financial statements. Limitations of financial statements. Meaning of analysis of financial statements. Objectives of financial analysis. Types of financial statements analysis. The nature of the analyst... Document abstract : Financial Analysis with reference to Ratio Analysis. Importance of ratio analysis: Useful in financial position analysis; Useful in simplifying ... Higher the ratio, better it is. 3. Return on Equity shareholders fund: This ratio is a measure of the percentage of net profit to equity shareholders funds. The ratio is expressed as follows: Return on equity

shareholders fund= Net profit after Tax X 100 Equity shareholders funds Here, Equity shareholders fund= Equity share capital + Capital Reserves + Revenue reserves + Balance of profit and loss account. Higher the ratio, better it is. 4. Return on Total Assets: This ratio is calculated to measure the profit after Tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not....
Abstract : Financial statements are prepared for the purpose of presenting a periodical review or report by the management and deal with state of investment in business and result achieved during the period under view. They reflect a combination of recorded facts, accounting conventions and personal judgments. From this it is clear that financial statements are affected by three things i.e. recorded facts, accounting conventions and personal judgments. Only those facts which are recorded in the business books will be reflected in the financial statements. The following points reflect truly the nature of financial statements of business entities: (i) These are reports or summarized reviews about the performance, achievements and weaknesses of the concern. (ii) These are prepared at the end of the accounting period so that various parties may take decisions of their future actions in respect of the relationship with the concerns. (iii) The reliability of financial statements depends on the reliability of the accounting data. These statements cannot be said to be true and fair representatives of the strengths or profitability of the concern if there are numerous frauds and defalcations in the accounts.

Abstract : The Indian Mutual Funds Industry has witnessed a sea change since UTI was first established in 1963. From a single player the number of players has increased to 29 and the number of schemes has spiraled to 477. The last decade has been a period of rapid growth for the MF industry. The paper begins by analyzing the current scenario in the industry characterized by problems with distribution, low investor awareness and concentration of corporate investors. In the next section, a comparison of the MF industry with global standards reveals that the industry still compares unfavorably with developed countries in terms of penetration, investor awareness, and diversity of products and the extent of use of

risk management techniques. Further comparison reveals that the attitude of regulator towards investor protection and the governance of mutual funds are at par with global standards. The paper then analyzes the future expectations from the mutual fund industry in terms of increased investor awareness, product diversity and improvement in penetration and distribution. In the end I recommend certain steps that SEBI and the AMCs should take in order to build investor confidence and trust. A subsidiary of Mahindra & Mahindra Limited. MMFSL is one of Indias leading non-banking finance companies. Focused on the rural and semi-urban sector, it provides finance for utility vehicles, tractors and cars and it have the largest network of branches covering these areas.

Abstract :
Financial management, as an integral part of overall management is not totally an independent area. It draws heavily on related disciplines and fields of study such as economics, accounting, marketing, production and quantitative methods. The scope of finance function was treated by the traditional approach in the narrow sense of procurement of funds by corporate enterprises to meet their financial needs. Thus defined, the field of study dealing with finance was treated as encompassing three inter-related aspects of raising and administering resources from outside: - Institutional arrangement in the form of financial institutions that the funds are raised from the capital market and their procedural aspects. - The financial instruments through which the funds re raised from the capital market and their procedural aspects. - Legal and accounting relationship between a firm and its sources of

funds. The traditional approach to the scope of finance functions evolved during the 1920s and 1930s and dominated academic thinking during 40s and through the early 50s. But, it suffered from serious drawbacks. Firstly, it focused on financing problems of corporate enterprises. To that extent, the scope was confined only to a segment of the industrial enterprises, as non-corporate organizations lay outside its scope. Secondly, the traditional treatment was found to have a lacuna to the extent that the focus was on long term financing. Its natural implication was that the issues involved in working capital management were not in the purview of the finance function. Last but not the least; the traditional treatment was outside looking in approach, that is, from the view point of suppliers of funds such as investors, investment bankers and so on. No consideration was given to the view point of those who had take internal finance decisions that is insider looking out was completely ignored. Hence the traditional approach has now been discarded.