Financial Ratios Of Companies Research Articles

On the significance of the economic determinants of systematic risk: empirical evidence with Finnish data

The individual and incremental information content of different economic determinants of common stock systematic risk is determined in the Finnish stock market. Based on previous theoretical articles, four financial characteristics of a firm are investigated: profitability, financial leverage, operating leverage, and corporate growth, measured as growth in earnings and dividends. In three of the four subperiods, the most important factor explaining stock returns is found to be highly related to the leverage of the firm. The results imply that the marginal utility of evaluating a large number of different financial ratios may be quite low. Instead, decisionmakers might be better off by concentrating in a relatively low number of key financial ratios of companies.

How to understand financial information

This paper, the second in a two part series, continues to explain how to interpret and understand financial information. It deals with measures of liquidity, solvency and fund flows and describes how to establish standards agamst which a company's financial ratios can be compared.