The study and analysis of financial ratios in identification of different levels of Iranian manufacturing units` financial health.
Subject Areas : Financial Knowledge of Securities Analysis
Keywords: Financial Health, Financial Ratios, Healthy, Intermediate and Distressed Co,
Abstract :
Financial health is defined as capabitiy of making profit and the continuation of industrial entity activity. Since companies in this research have been divided into three groups as to their financial health state called; healthy, intermediate and distressed .The average difference of some of their financial ratios in the three groups has been analyzed. The orientation of the present research is "functional" objectively and "descriptive" administratively. Using the "library" method the needed data was extracted. Using Cochran formula 84 companies were selected from 37 industries and 224 companies, divided through random sampling into 16 healthy, 45 intermediate and 19 distressed companies as defined. Using Excel software 12 financial ratios were calculated in 4 states of liquidity, leverage, activity and market value. SPSS (15) was used to test hypotheses and (ANOVA) statistical variance analysis to compare the average of ratios at 5% level of error. Research findings show that there is significant statistical differences among these companies according to different levels of financial health based on leverage, activity and market value ratios. But the liquidity state difference of these three levels is significant. Based on Dunnett and Tukey tests the distressed companies are the factors yielding the difference. i.e. distressed companies are statistically on one side and intermediate and healthy ones on the other side of distribution.