A test on a priori financial characteristics of the firm

Article Abstract:

An empirical study of a priori classification patterns of financial ratios is conducted using the confirmatory factor analysis approach. Results of the studyindicate high correlation among financial ratio categories and poor empirical applicability of a priori classification patterns. The Quick Ratio proved most effective for short-term solvency, while the Equity to Capital Ratio proved most effective for financial leverage. However, further study is recommended todetermine efficient classification patterns of financial ratios because of the inconclusive results.

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Time-series distributional properties of financial ratios: empirical evidence from Finnish listed firms

Article Abstract:

The distribution properties of time-series accounting data is studied in the analysis of financial ratios that evaluate a firm's financial performance over time. Results indicate that a significant number of raw ratio distribution is nonnormal, implying that careful consideration of the accounting data's distributional properties prior to construction of parametric tests is needed. The nonnormalities are largely accounted for by economy-wide effects, however, so a direct test for these is provided.

Measurement, Statistics, Distribution (Economics), Industrial productivity

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Financial ratio distribution irregularities: implications for ratio classification

Article Abstract:

The impact of financial ratio distribution irregularities on financial decision making is analyzed. The analysis was preceded by studies that depicted problems with the application of parametric statistical techniques in financial ratio studies. It is shown that irregularities afffected empirical classification results. The application of transformed ratios was likewise shown to remove time-series factor pattern instability.

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