Evaluating the Stability of the Financial Ratios of Jordanian Industrial Companies

Abstract

The purpose of the study was to identify if the financial ratios of Jordanian industrial companies remained stable across sector and over time. The study used six financial ratios from fifty-six companies across six sectors with financial information from 2010 to 2014. A two way multivariate analysis of variance was performed to identify the stability of the ratios across the sectors and over the time. The results of the study showed that the financial ratios which showed some difference across sector were EBITTA (Earnings before Interest and Tax), CAT (Current Assets Turnover) and CFTA (Cash Flow to Total Assets). There were no differences observed between the financial ratios over time. The interaction of Time and Sector revealed no significant interaction effects. This suggests that as a whole, the financial ratios remained stable over time and sectors over the sectors and period chosen for the study.

Study of Consistency and Profitability Through Financial Ratio Analysis in Plantations Industry in Sri Lanka

“…The results of the study by Rumman (2015), indicated that the Earnings before Interest and Tax, Current Assets Turnover and Cash Flow to Total Assets were financial ratios which were different from industry to industry. When it comes to variations between the financial ratios over time there were no changes as per the study.…”

“…As per Rumman (2015), financial ratios can be used in order to financially ascertain Performance of companies. This ratio study facilitates companies to realize their financial strengths and weaknesses.…”