On the Stability of the Classification of Financial Ratios; An Application of Factor and Transformation Analysis

Paavo Yli-Olli and Ilkka Virtanen

Abstract

The purpose of this study is to give a contribution to the methodological debate in the area of financial ratios. First, existing classifications for financial ratios are surveyed. After that an empirical classification system based on factor analysis is introduced. The stability of the emergent financial patterns during the subperiods of the whole period under study is examined by transformation analysis of the factorial data.

(Proceedings of The University of Vaasa, Research Papers No. 117 (1986), 36 p.)