Financial Ratio Analysis: A literature Review Working Paper

Zhang, Yi and Silva, Beatriz and Moreau, Élodie and Tāne, Hinewera (2025): Financial Ratio Analysis: A literature Review Working Paper.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial Ratio Analysis, Corporate Resilience, Crisis Management, Panel Data
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M40 - General

References

Altman, E. I. (2018). Applications of distress prediction models: What have we learned after 50 years from the Z-Score models? International Journal of Financial Studies, 6(3), 70.

Gazilas, E. T. (2024). Factors Influencing Life Expectancy in Low-Income Countries: A Panel Data Analysis. Journal of Applied Economic Research, 23(3), 580-601.

Brigham, E. F., & Ehrhardt, M. C. (2022). Financial Management: Theory & Practice. 16th ed. Cengage Learning.

Obradović, S., & Đurić, Ž. (2021). Comparative financial ratio analysis of construction companies in the Republic of Serbia. Engineering Economics, 32(2), 152–160.

Panda, B., & Nanda, S. (2021). Financial ratio analysis and its impact on profitability: A study of Indian pharmaceutical companies. Journal of Asian Business Strategy, 11(2), 39–46. Covar, E. (2024). Pandemic Resilience in Czech's Big Four Firms.

Gazilas, E. T. (2024). An Econometric Analysis Of European Online Purchases And Economic-Banking Dynamics. International Journal of Advanced Economics, 6(1), 1-11.

Covar, E. (2025). Resilience and Rebound: A Financial Analysis of Czech's Big Four Accounting Firms Post-COVID-19 Recovery.

Ferreira, B., Ndiaye, F., & Silva, C. (2025). The Application of Financial Ratios and Panel Data Analysis in Assessing Firm Performance and Socio-Economic Dynamics.

Fridson, M. S., & Alvarez, F. (2022). Financial Statement Analysis. 5th ed. Wiley.

Horrigan, J. O. (1968). A Short History of Financial Ratio Analysis. The Accounting Review, 43(2), 284–294.

Lev, B. (1969). Industry averages as targets for financial ratios. Journal of Accounting Research, 7(2), 290–299.

Gazilas, E. T. (2024). Does Urban Fixed-Line Telecommunication Density Influence Profitability and Operational Efficiency in Greece's Telecommunications Industry?. Finance, Accounting and Business Analysis (FABA), 6(2), 228-239.

Penman, S. H. (2016). Financial Statement Analysis and Security Valuation. 5th ed. McGraw-Hill.

Salehi, M., Tarighi, H., & Ghanbari, M. (2023). The role of financial ratios and ESG disclosures in predicting firm resilience during crises. Journal of Financial Reporting and Accounting.

Gazilas, E. T. (2024). Economic Factors Influencing Homicide Rates: A European Perspective. Journal of Applied Economic Research, 23(2), 258-278.

Shvekens, M. (2024). Crisis Management and Financial Adaptability: An In-Depth Analysis of LOTTOKINGS INDIA SA's Resilience and Strategic Responses in the Face of the COVID-19 Pandemic.

Covar, E. (2025). Strategic financial insights: assessing the pandemic impact on greece's top aviation companies.

Al‐Malkawi, H. A. N., Bhatti, M. I., & Magableh, S. I. (2020). On the relationship between ownership structure and firm performance: Evidence from Jordanian listed firms. International Journal of Accounting & Information Management, 28(2), 261–276.

Gazilas, E. T. (2024). Urban Fixed-Line Telecommunication Density and Its Influence on Financial Outcomes in Greece's Leading Telecom Firms.

Arsoy, A. P., & Ünal, Y. (2021). Financial ratio analysis of renewable energy firms: Evidence from Turkey. Renewable Energy, 169, 968–976.

Bhunia, A., & Mukhuti, S. S. (2022). Financial performance analysis: A comparative study of selected cement companies in India using ratio analysis. Journal of Management Research and Analysis, 9(1), 1–7.

Kumar, S., & Sharma, A. K. (2022). Performance analysis of Indian commercial banks: A CAMELS approach with ratio analysis. Asian Economic and Financial Review, 12(2), 129–142.

Nduka, E. K., & Anyanwu, J. C. (2020). Financial ratio analysis and performance of manufacturing firms in Nigeria. Journal of Accounting and Taxation, 12(2), 55–62.

Gazilas, E. T. (2025). Analyzing US Tariff Effects: An Event Study on Greek Energy Companies (No. 124354). University Library of Munich, Germany.

Chouhan, V., Aggarwal, P., & Chandra, B. (2021). Measuring financial performance of Indian cement companies: An application of ratio analysis. Materials Today: Proceedings, 46(5), 11430–11434.

Djalilov, K., & Piesse, J. (2021). Financial ratios and bank performance: Evidence from transition economies. Emerging Markets Finance and Trade, 57(2), 456–472.

El Kalak, I., & Hudson, R. (2021). The effect of size on the failure probabilities of SMEs: A UK study using logistic regression and a wide range of financial ratios. International Small Business Journal, 39(2), 126–151.

Obradović, S., & Đurić, Ž. (2021). Comparative financial ratio analysis of construction companies in the Republic of Serbia. Engineering Economics, 32(2), 152–160.

Panda, B., & Nanda, S. (2021). Financial ratio analysis and its impact on profitability: A study of Indian pharmaceutical companies. Journal of Asian Business Strategy, 11(2), 39–46.

Gazilas, E.T. (2024). Empirical analysis on the impact of labour market regulations on uninsured employment in Greece. Economics of Development, 23(1), 8-17.

Ferreira, B., Ndiaye, F., & Silva, C. (2025). The Application of Financial Ratios and Panel Data Analysis in Assessing Firm Performance and Socio-Economic Dynamics.

Li, K., & Lin, B. (2022). Financial performance assessment of power grid companies: A three-stage DEA and ratio analysis approach. Energy, 252, 123005.

Ming-Chang, L., & Nadarajah, S. (2020). Financial ratios and corporate bankruptcy prediction. International Review of Financial Analysis, 70, 101494.

Mukherjee, S., & Sen, C. (2022). A financial ratio-based approach for evaluating the financial health of Indian aviation industry. Journal of Advances in Management Research, 19(4), 625–645.

Gazilas, E. T., & Vozikis, A. (2024). The impact of market concentration on the financial performance of general private clinics in Greece. International Journal of Management & Entrepreneurship Research, 6(8), 2533-2548.

Bătae, O. M., Dragomir, V. D., & Feleagă, L. (2021). The use of financial ratios in assessing the financial performance of European airlines before and during COVID-19. Economic Research-Ekonomska Istraživanja, 34(1), 2867–2886.

Ibarra, V. C., & Miller, A. (2023). Financial ratios and corporate sustainability performance: Evidence from the Philippines. Sustainability, 15(3), 2113.

Nassir, A. M., Mohamed, N., & Samad, F. A. (2022). Financial ratios and firm value: Evidence from Malaysian listed firms. International Journal of Business and Society, 23(1), 163–176.

Olson, D., & Zoubi, T. (2022). Bankruptcy prediction using traditional financial ratios and accounting data: A review. Journal of Economic Studies, 49(7), 1501–1521.

Gazilas, E. T., & Vozikis, A. (2023). An Empirical Analysis on the Impact of Market Concentration on the Financial Performance of General Private Clinics in Greece.

Salehi, M., Tarighi, H., & Ghanbari, M. (2023). Financial distress prediction: Comparative evidence from traditional ratios and machine learning. Technological Forecasting and Social Change, 189, 122258.

Yildiz, B., & Bozkurt, İ. (2020). Financial ratio analysis in the automotive industry: Evidence from Turkey. Business and Economics Research Journal, 11(2), 447–456.

Govender, B., Cortez, G., Carter, E., & Covar, E. (2025). Resilience and Rebound: A Financial Analysis of Czech's Big Four Accounting Firms Post-COVID-19 Recovery.

Shvekens, M. (2024). Crisis Management and Financial Adaptability: An In-Depth Analysis of LOTTOKINGS INDIA SA's Resilience and Strategic Responses in the Face of the COVID-19 Pandemic.

Shvekens, M. (2025). Revealing Financial Success: A Comprehensive Decade-long Financial Accounting Analysis of Hellenic Telecommunications Organisation SA (OTE)-A Leading Force in Greece's Stock Exchange.

Singh, G., Wei, G., & Shvekens, M. (2024). Crisis Management and Financial Adaptability: An In-Depth Analysis of LOTTOKINGS INDIA SA's Resilience and Strategic Responses in the Face of the COVID-19 Pandemic.

Achim, M. V., Borlea, S. N., & Mare, C. (2022). Bankruptcy prediction by using financial ratios: A case of non-financial Romanian listed companies. Journal of Risk and Financial Management, 15(3), 103.

Al-Debi’e, M. M., & Al-Fayoumi, N. A. (2021). The impact of COVID-19 on banks’ financial performance: Evidence from Jordan using financial ratios. Journal of Asian Finance, Economics and Business, 8(5), 213–221.

Altman, E. I., Iwanicz-Drozdowska, M., Laitinen, E. K., & Suvas, A. (2020). Financial distress prediction in an international context: A review and empirical analysis of Altman’s Z-score model. Journal of International Financial Management & Accounting, 31(3), 357–381.

Azzali, S., & Azzali, S. (2022). Financial ratios as predictors of stock returns: Evidence from Italian listed firms. International Journal of Financial Studies, 10(1), 2.