Turnover ratios and profitability ratios calculation methods: the book or average value
Date
2019
Authors
Tissen, Maria
Sneidere, Ruta
Journal Title
Journal ISSN
Volume Title
Publisher
University of Latvia
Abstract
The scientific literature of the turnover ratios and profitability ratios calculation offers to use book or
average value of balance sheet calculation methods. Different schools of financial analysis nowadays offer many
variations of the ratio calculations and even though the components of ratio formulas change, the meaning stays the same.
The aim of this research is to analyze the turnover and profitability ratios, to study the different methods of calculation,
based on different schools of financial analysis and empirical research results, and to create proposals for companies for
the use of these methods for financial analysis.
The authors of this paper are using the international scientific literature, articles and research papers that help to study
the measures of turnover and profitability ratios. For the empirical research, to compare the results using the book or
average value of balance sheet calculations the authors have used the data from the annual statements of Latvian
companies from different industries over a six-year period. In the research the authors have applied quantitative and
qualitative research methods of economics such as the mathematical and the statistical methods, the ratio analysis, the
graphical method, logically – constructive methods.
The result of done research shows that differences exist between using the book and average value calculation for
turnover ratios and profitability ratios, but quantitative research during six-years period shows that results are uniform
and parallel.
Description
Keywords
ratios , analysis , book or average value , Research Subject Categories::SOCIAL SCIENCES::Business and economics