The Normality Assumption In The Distributions Of Financial Ratios:
No Thumbnail Available
Date
2007
Authors
Avwokeni, A.J.
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The study was designed to establish the normality assumption that is said to underlie the distribution of financial ratios. The participants were 8 financial ratios: working capital to total assets, current assets to current liabilities, current assets less inventories to current liabilities, retained earnings to total assets, operating income to total assets, market value of equity to book value of debt, total debt to total assets, and sales to total assets. The ratios were drawn from four pragmatic groups: liquidity,
profitability, financing structure, and capital turnover. Each ratio was obtained for a period of 10 years (1994-2003) from 12 companies; three each in Pharmaceutical, Automobile, Conglomerate and Industrial-domestic industries in the manufacturing sector. The distribution of each ratio was analyzed for normality at three levels using the coefficients of skewness and Kurtosis, and the moment statistic test: first, the distribution of each ratio was obtained from a single firm ; then extended across firm within an industry, and finally across industries. The results indicate that the distribution of financial ratio in a firm or across firms within an industry follows a normal distribution
but non-normal when extended across industries. However, the ratio of retained earnings to total assets and operating income to total assets follow a normal distribution irrespective of the extension across industries. •
Description
Staff Publication
Keywords
Data , Financial Ratio
Citation
Avwokeni,AJ. (2007) The Normality Assumption In The Distributions Of Financial Ratios: Empirical Evidence With Nigeria Data. Global Journal Of Accounting. Vol. 2, (1), p.1 -13.