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Financial Ratio Analysis: A literature Review Working Paper

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Listed:
  • Zhang, Yi
  • Silva, Beatriz
  • Moreau, Élodie
  • Tāne, Hinewera

Abstract

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.

Suggested Citation

  • Zhang, Yi & Silva, Beatriz & Moreau, Élodie & Tāne, Hinewera, 2025. "Financial Ratio Analysis: A literature Review Working Paper," MPRA Paper 125289, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:125289
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    References listed on IDEAS

    as
    1. Emmanouil Taxiarchis Gazilas, 2024. "Economic Factors Influencing Homicide Rates: A European Perspective," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 23(2), pages 258-278.
    2. Emmanouil Taxiarchis Gazilas, 2024. "Factors Influencing Life Expectancy in Low-Income Countries: A Panel Data Analysis," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 23(3), pages 580-601.
    3. Edward I. Altman, 2018. "Applications of Distress Prediction Models: What Have We Learned After 50 Years from the Z-Score Models?," IJFS, MDPI, vol. 6(3), pages 1-15, August.
    4. Gazilas, Emmanouil Taxiarchis, 2024. "An empirical analysis on the impact of labour market regulations on uninsured employment in Greece," MPRA Paper 121311, University Library of Munich, Germany.
    5. Covar, Eliska, 2025. "Resilience and Rebound: A Financial Analysis of Czech's Big Four Accounting Firms Post-COVID-19 Recovery," MPRA Paper 124351, University Library of Munich, Germany.
    6. Gazilas, Emmanouil Taxiarchis, 2024. "Urban Fixed-Line Telecommunication Density and Its Influence on Financial Outcomes in Greece's Leading Telecom Firms," MPRA Paper 122531, University Library of Munich, Germany.
    7. Gazilas, Emmanouil Taxiarchis & Vozikis, Athanassios, 2023. "An Empirical Analysis on the Impact of Market Concentration on the Financial Performance of General Private Clinics in Greece," MPRA Paper 121234, University Library of Munich, Germany.
    8. Lev, B, 1969. "Industry Averages As Targets For Financial Ratios," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 7(2), pages 290-299.
    9. Covar, Eliska, 2025. "Strategic financial insights : assessing the pandemic impact on greece's top aviation companies," MPRA Paper 124371, University Library of Munich, Germany.
    10. Covar, Eliska, 2024. "Pandemic Resilience in Czech's Big Four Firms," MPRA Paper 124349, University Library of Munich, Germany.
    11. Ferreira, Bianca & Ndiaye, Fatima & Silva, Costa, 2025. "The Application of Financial Ratios and Panel Data Analysis in Assessing Firm Performance and Socio-Economic Dynamics," MPRA Paper 124723, University Library of Munich, Germany.
    12. Shvekens, Martins, 2025. "Revealing Financial Success: A Comprehensive Decade-long Financial Accounting Analysis of Hellenic Telecommunications Organisation S.A (OTE) - A Leading Force in Greece's Stock Exchange," MPRA Paper 124256, University Library of Munich, Germany.
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    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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