A Cross-Industry Analysis of Financial Ratios: Comparabilities and Corporate Performance

by Rajib K. Doogar, David E. Jensen, J Edward Ketz

Overview

Whether used as predictors or indicators of stock prices, financial risk, merger candidates, or bond yields, financial ratios have been, and continue to be, a popular tool for analyzing a firm and its performance. Practitioners and academics who employ financial ratios often compare and contrast across several industries, but such evaluations assume that the ratios of one industry measure the same underlying concepts as the ratios of another. This book provides evidence on the comparability of financial ratios across several industries, assessing the similarity or dissimilarity of ratios among industry taxonomies, or groups of ratios.

Extending previous studies that focused primarily on manufacturing firms, this work surveys a wide variety of both manufacturing and retail corporations, and determines the classification patterns of their respective financial ratios. The taxonomies of thirty two ratios, in seven representative industries, are examined for the ten-year period from 1978 through 1987. Two introductory chapters detail the nature of the research, the data utilized, variables employed, and statistical methodologies, as well as providing a brief summary of the results. A third chapter furbanishes results for the entire economy by factors of returban, cash flow, cash position, inventory, sales, liquidity, and debt; while seven separate chapters describe the study's conclusions for each of the primary industries: automobile and aerospace; chemical, rubber, and oil; electronics; food; retail; steel; and textile. The work concludes with a summary of the study and its conclusions, and an examination of the limitations of this type of research and possibilities for its extension. This book will be a valuable practical resource for accounting and finance professionals, as well as an important reference for courses in finance, accounting, and management. Public, academic, and business libraries will also find it a useful addition to their collections.

Product Details

ISBN-13:	9780899304632
Publisher:	Bloomsbury Academic
Publication date:	09/18/1990
Pages:	232
Product dimensions:	6.14(w) x 9.21(h) x 0.56(d)

About the Author

J. Edward Ketz is associate professor of accounting and MIS in the College of Business Administration at Pennsylvania State University.

Rajib K. Doogar is a PhD candidate in the Department of Accounting and MIS at Pennsylvania State University.

David E. Jensen is assistant professor of accounting at Bucknell University.

Table of Contents

Purpose and Overview
Data, Variables, and Methodology
Classification of the Ratios for the Economy
Classification and Analysis of Ratios for the Automobile and Aerospace Industry
Classification and Analysis of Ratios for the Chemical, Oil, and Rubber Industry
Classification and Analysis of Ratios for the Electronics Industry
Classification and Analysis of Ratios for the Food Industry
Classification and Analysis of Ratios for the Retail Industry
Classification and Analysis of Ratios for the Steel Industry
Classification and Analysis of Ratios for the Textile Industry
Summary and Conclusions
Bibliography
Index

Editorial Reviews

This volume is a specialized treatise on the comparability of financial ratios across the industry classifications. The treatise is thoroughly written and demonstrates how a financial analyst may use factor-analytic techniques 'to view the fundamental relationships underlying the date from different perspective and to use his or her intimate knowledge of the industry and the economy to make sense of financial numbers.' In short, the book is for the skilled practitioner of security analysis. Most appropriate for use in advanced-level courses in investments, courses that are more commonly taught in business schools than in liberal arts colleges. University and professional collections.” —Choice

From the Publisher