Consensus on Commonly used Financial Ratios

The practice of using financial ratios in order to enhance the end result of financial analysis has gained much ground and attention in Romania, especially in the context of the country’s recent accounting reform. While the added benefit of financial ratio usage for the decision making accounting information user is indubitably valid, a certain degree of confusion is observed when dealing with the issue – in both fields of academia and practice. Our research indicates that this is not an isolated case for Romania, as a diverse range of literature from around the world employs different names and formulas for the same ratio. The purpose of this paper is to compile a conceptual list of 20 ratios that are most commonly used across academic literature, as a basis for future research on the topic of ratio analysis comparability between countries using different reporting systems. Furthermore, a limited benefit for the domestic professional and academic world would be brought in the form of a benchmark, where students and accounting information users could use the present notions as a starting point towards a higher degree of understanding the mechanics of ratio analysis.