An Examination Of Financial Ratios For The Asset Management Of Selected Industries

Abstract

The empirical approach in this research uses factor analysis to investigate the importance of various financial ratios in selected industries from 1972 through 1981 as reported in the Compustat Database.  One of the main conclusions is that financial ratios do not differ significantly in importance among the industries studied.  However, their relative importance is not consistent within an industry group over time.  This new finding indicates that past relationships cannot be used to accurately forecast future relationships.