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Financial Ratios (financial + ratio)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting76%
Humanities and Social Sciences11%

Selected Abstracts

Assessing the Baby Boomers' Financial Wellness Using Financial Ratios and a Subjective Measure

FAMILY & CONSUMER SCIENCES RESEARCH JOURNAL, Issue 4 2004
Eunyoung Baek
The purpose of the study was to examine the financial wellness of the baby boomers using two definitions of financial wellness: objective and subjective financial wellness. With data on 2,021 baby boomer households from the 2001 Survey of Consumer Finances, the study examined factors related to three measures of objective wellness and one measure of subjective wellness. The results showed that 20% met the guideline for liquid assets-to-income, 74% met the guideline for debt-to-assets, 62% met the guideline for investment assets-to-net worth, and 64% said that compared to others of their generation and background, they were lucky in their financial affairs. The results help consumer educators and financial advisors understand which factors should be emphasized when providing information to baby boomers. [source]

The Time Series Properties of Financial Ratios: Lev Revisited

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2003
Christos Ioannidis
This paper re-evaluates the time series properties of financial ratios. It presents new empirical analysis which explicitly allows for the possibility that financial ratios can be characterized as non-linear mean-reverting processes. Financial ratios are widely employed as explanatory variables in accounting and finance research with applications ranging from the determinants of auditors' compensation to explaining firms' investment decisions. An implicit assumption in this empirical work is that the ratios are stationary so that the postulated models can be estimated by classical regression methods. However, recent empirical work on the time series properties of corporate financial ratios has reported that the level of the majority of ratios is described by non-stationary, I(1), integrated processes and that the ratio differences are parsimoniously described by random walks. We hypothesize that financial ratios may follow a random walk near their target level, but that the more distant a ratio is from target, the more likely the firm is to take remedial action to bring it back towards target. This behavior will result in a significant size distortion of the conventional stationarity tests and lead to frequent non-rejection of the null hypothesis of non-stationarity, a finding which undermines the use of these ratios as reliable conditioning variables for the explanation of firms' decisions. [source]

Sharing Wealth: Evidence from Financial Ratios in Spain

JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2002
José L. Gallizo
Firms are managed on the basis of relationships between mutually involved groups, not only because of market forces, but also due to the influence that each group can exert over distribution decisions at a given moment in time. On the basis of a value added statement, it is possible to analyse the ability a firm has to reward all agents and to consider how the residual income is to be distributed. In this paper we set out to establish the tensions that arise between productive agents in the distribution of generated wealth. We carry out a time analysis of the movements between relationships that provide information on the distribution of that wealth, using data drawn from the Spanish Transport Equipment Manufacturing Industry. We propose a new multivariate dynamic linear model that is capable of analysing the joint evolution of the value added distribution ratios, with our particular objective being to throw light on the factors underlying this evolution. This analysis results in one single factor that explains 92.88 per cent of the total variation present in the residuals of the model. [source]

The Time Series Properties of Financial Ratios: Lev Revisited

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2003
Christos Ioannidis
This paper re-evaluates the time series properties of financial ratios. It presents new empirical analysis which explicitly allows for the possibility that financial ratios can be characterized as non-linear mean-reverting processes. Financial ratios are widely employed as explanatory variables in accounting and finance research with applications ranging from the determinants of auditors' compensation to explaining firms' investment decisions. An implicit assumption in this empirical work is that the ratios are stationary so that the postulated models can be estimated by classical regression methods. However, recent empirical work on the time series properties of corporate financial ratios has reported that the level of the majority of ratios is described by non-stationary, I(1), integrated processes and that the ratio differences are parsimoniously described by random walks. We hypothesize that financial ratios may follow a random walk near their target level, but that the more distant a ratio is from target, the more likely the firm is to take remedial action to bring it back towards target. This behavior will result in a significant size distortion of the conventional stationarity tests and lead to frequent non-rejection of the null hypothesis of non-stationarity, a finding which undermines the use of these ratios as reliable conditioning variables for the explanation of firms' decisions. [source]

Reconciling Financial Information at Varied Levels of Aggregation,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2004
ANIL ARYA
Abstract Financial statements summarize a firm's fiscal position using only a limited number of accounts. Readers often interpret financial statements in conjunction with other information, some of which may be aggregated in a different way (or not at all). This paper exploits properties of the double-entry accounting system to provide a systematic approach to reconciling diverse financial data. The key is the ability to represent the double-entry system by network flows and, thereby, access well-recognized network optimization techniques. Two specific uses are investigated: the reconciliation of audit evidence with management-prepared financial statements, and the creation of transaction-level financial ratios. [source]

IDENTIFYING THE MODERATOR FACTORS OF FINANCIAL PERFORMANCE IN GREEK MUNICIPALITIES

FINANCIAL ACCOUNTABILITY & MANAGEMENT, Issue 3 2008
Sandra Cohen
The use of financial ratios is a widespread method for assessing the financial performance of private sector companies. However, the application of an analogous exercise in the public sector is a less straightforward one. In the later case it is a multifaceted task that involves judgments about the interplay of complex social, organizational and financial factors. In this paper we use accrual end of the year financial statements data of Greek Municipalities for the period 2002,2004 to compute nine commonly used performance assessment financial ratios. We find corroborative evidence that factors, which are exogenous to the municipalities' control, such as their wealth and size, have statistically significant impact on ratio values. Thus, as financial ratios are significantly influenced by socio-economic factors like municipal wealth and size, cross sectional comparisons on the basis of these ratios should be made with caution and performed for municipalities that exhibit similarities in terms of size and wealth. [source]

Impact of International Financial Reporting Standard adoption on key financial ratios

ACCOUNTING & FINANCE, Issue 2 2009
Anna-Maija Lantto
M41 Abstract Although previous research has investigated the economic consequences of International Financial Reporting Standard (IFRS) adoption, there is little evidence on the impact of IFRS adoption on key financial ratios. To fill this gap, we examine this issue in a continental European country (Finland). Our results show that the adoption of IFRS changes the magnitude of the key accounting ratios. Moreover, we extend the literature by showing that the adoption of fair value accounting rules and stricter requirements on certain accounting issues are the reasons for the changes observed in accounting figures and financial ratios. [source]

Interest rate transmission in the UK: a comparative analysis across financial firms and products

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 1 2009
Ana-Maria Fuertes
Abstract This paper differentiates itself from the existing literature by testing for heterogeneities in the interest rate transmission mechanism using a large sample of 662 monthly retail rate histories (1993,2004) on seven key deposit and loan products. Error correction models are estimated to analyse the long-run pass-through, the long-run mark-up and the short-run speed of adjustment. The prediction that the official and retail rates move together in the long run is supported by the data. The evidence suggests weak between-product heterogeneity but notable differences were found between financial firms in the way they adjust their rates, which could hinder the achievement of monetary policy objectives. Consumer responses to official rate changes could therefore be more phased and intricate than hitherto believed. Heterogeneity in adjustment is found to be linked to menu costs and key financial ratios under managerial control. Copyright © 2008 John Wiley & Sons, Ltd. [source]

The Time Series Properties of Financial Ratios: Lev Revisited

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2003
Christos Ioannidis
This paper re-evaluates the time series properties of financial ratios. It presents new empirical analysis which explicitly allows for the possibility that financial ratios can be characterized as non-linear mean-reverting processes. Financial ratios are widely employed as explanatory variables in accounting and finance research with applications ranging from the determinants of auditors' compensation to explaining firms' investment decisions. An implicit assumption in this empirical work is that the ratios are stationary so that the postulated models can be estimated by classical regression methods. However, recent empirical work on the time series properties of corporate financial ratios has reported that the level of the majority of ratios is described by non-stationary, I(1), integrated processes and that the ratio differences are parsimoniously described by random walks. We hypothesize that financial ratios may follow a random walk near their target level, but that the more distant a ratio is from target, the more likely the firm is to take remedial action to bring it back towards target. This behavior will result in a significant size distortion of the conventional stationarity tests and lead to frequent non-rejection of the null hypothesis of non-stationarity, a finding which undermines the use of these ratios as reliable conditioning variables for the explanation of firms' decisions. [source]

Measuring profitability impacts of information technology: Use of risk adjusted measures

PROCEEDINGS OF THE AMERICAN SOCIETY FOR INFORMATION SCIENCE & TECHNOLOGY (ELECTRONIC), Issue 1 2003
Anil Singh
This study focuses on understanding how investments in information technology are reflected in the income statements and balance sheets of firms. Today, little doubt exists that information technology is being used by organizations in a wide variety of settings and ways and that information technology is critical for the smooth operation of many organizations. Further, a strong body of research exists showing that information technology usage is positively correlated with organizational productivity. However, empirical evidence of information technology contributing to corporate profitability has not been forthcoming. Although the income statements, balance sheets, and cash-flow statements all together summarize the financial structure, health and profitability of firms but still much doubt and confusion exists over the impacts of information technology usage on a firm's "hard" numbers such as revenues, cost, profit margins, or financial ratios and structure. So far, only a few studies have found a significant positive relationship between information technology and some aspect of corporate profitability. The present research argues that the inability of earlier studies to identify the relationship between information technology investments and bottom-line performance is in part because of methodological reasons. This study first defines and develops risk-adjusted measures of corporate profitability. Then, it examines the income statements and balance sheets of more than 500 firms that are leading users of information technology for the period 1988-98. Finally, the study shows that the relationship between information technology investments and corporate profitability is much better explained by using risk-adjusted measures of corporate profitability than using the same measures of corporate profitability but unadjusted for risk. [source]

The speed of adjustment of financial ratios: A hierarchical Bayesian approach using mixtures

APPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY, Issue 2 2008
Pilar Gargallo
Abstract This paper presents a hierarchical Bayesian analysis of the partial adjustment model of financial ratios using mixture models, an approach that allows us to estimate the distribution of the adjustment coefficients. More particularly, it enables us to analyse speed of reaction in the presence of shocks affecting financial ratios objectives as a basis to establish homogenous groups of firms. The proposed methodology is illustrated by examining a set of ratios for a sample of firms operating in the U.S. manufacturing sector. Copyright © 2007 John Wiley & Sons, Ltd. [source]

Identifying Financial Distress Indicators of Selected Banks in Asia

ASIAN ECONOMIC JOURNAL, Issue 1 2004
Shahidur Rahman
The banking sector plays a pivotal role in the economic development of most Asian countries. In 1997, a full-fledged banking and financial crisis took place in South Asian countries. Many banks had to be bailed out by their governments. It is believed that an examination of indicators that led to the problems suffered by banks in this region will be of enormous benefit. Models were developed for each country that identified banks experiencing financial distress as a function of financial ratios. The countries in the study include Indonesia, South Korea and Thailand. The banking sectors of these three countries are ideal for this study, as the banks enjoyed profitability during the pre-crisis period and were the most severely affected by the financial crisis in 1997. Logistic regression was used to analyze the data sample from 1995 to 1997. In the findings, capital adequacy, loan management and operating efficiency are three common performance dimensions found to be able to identify problem banks in all three countries. It is hoped that the financial ratios and results of the models will be useful to bankers and regulators in identifying problem banks in Asia. [source]