Financial Ratio Analysis: A literature Review Working Paper

Financial ratio analysis remains an indispensable tool in corporate finance for assessing firm performance, comparing industry benchmarks, and informing strategic decision-making. This literature review critically examines the evolution and application of financial ratios, highlighting both their enduring relevance and inherent limitations. Drawing on recent works, including Gazilas (2024) and studies by Covar (2024, 2025), Ferreira et al. (2025), and Shvekens (2024, 2025), this paper explores how ratios have been applied to evaluate organizational resilience during the COVID-19 pandemic, sector-specific dynamics, and broader socio-economic impacts. While traditional ratio analysis offers standardized, comparable metrics, its backward-looking nature and sensitivity to data inconsistencies can limit predictive accuracy. Emerging research emphasizes integrating ratio analysis with panel data methods, big data, ESG metrics, and scenario planning to enhance its utility in turbulent environments. The review concludes that future studies should expand geographic and sectoral coverage, adopt hybrid analytical frameworks, and leverage technological advancements to maintain ratio analysis as a vital element of strategic financial assessment in an increasingly complex global economy.