accounting ratio

Accounting ratioclick for a larger image
Fig. 4 Accounting ratio. The ratio pyramid.

accounting ratio

a means of placing a firm's accounting results in context by expressing the figures as ratios or percentages of other figures in order to appraise their ‘bigness’ or ‘smallness’. Examples include RETURN ON CAPITAL EMPLOYED and STOCK TURNOVER RATIO. Fig. 4 shows the main ratios used and the relationship between them.
References in periodicals archive ?
Unlike other credit risk models that use accounting ratio analysis, the SmartRatios model incorporates information from forward-looking analyst estimates via StarMine's proprietary SmartEstimate rather than relying solely on backward-looking reported financials, the statement said.
An accounting ratio is the comparison of two figures in a set of accounts.
Equation 1 contains two mechanically derived performance measures--share price performance, represented by cumulative abnormal security returns in 1982 (CAR82), and an accounting ratio denoting the change in return on assets from 1981 to 1982 (ROA82)--and the control variables for growth (MKTSHARE), organizational size (ASSETS82), and CEO tenure (TENURE).
The ratio of a shadow price to the market price is often called the accounting ratio.
Researchers have found that accounting ratio distributions within industries tend to be non-normal.
The criteria can specify minimum turnover but that cannot be more than twice the value of the contract, or require accounting ratios of assets against liabilities.
Similarly, investors in listed companies which are similar to non-listed Ubers, or other industry specific firms, can inspect market share, growth, comparable accounting ratios and valuations, etc.
Lehn and Makhija (1997) and Lefkowitz (1999) in their respective studies concluded that EVA has a better relation with stock returns as compared to accounting ratios.
The results showed that, IFRS changes the magnitude of accounting ratios due to the adoption of fair value accounting and stricter requirement on certain accounting issues.
While the prediction accuracy of Tinoco and Wilson's models (2013) (one based on accounting variables) has been obtained as 73% and 89% (on based on market variables) by using artificial networks method, this indicates the complementary role of market variables in estimating the bankruptcy models that are based on accounting ratios.
It covers financial record keeping, income statements, the balance sheet, checking the double-entry system, accounting for various types of business organizations, business and standard costing, marginal costing and decision making, budgeting, working capital management, capital investment appraisal, limited companies and published accounts, accounting standards, statement of cash flows, and accounting ratios.
The reality is, hitting financial targets or accounting ratios doesn't motivate everyone.

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