Abstract:
Purpose – The main objective of this study is to find out the impact of ratio analysis on
firms financial performance and the empirical findings based on developing country
market (KSE 100 Index).
Design/methodology/approach – Multiple financial ratios are used to examine the
empirical finding of this study based on sample data. Descriptive statistics is used for
finding the relationship between firm’s financial performance and investor investment
decision. Thirteen financial ratios are used to measure the financial performance: current
ratio(CR), quick ratio(QR), debt ratio(DR), earnings ratio(ER), long term debt over total
asset ratio(LTDTA), debt to equity ratio(DE), operating cash flow ratio(OCFR), return on
asset ratio(ROA), return on equity ratio(ROE), return on invested capital ratio(ROIC), net
profit margin ratio(NPM), asset turnover ratio(ATR) and earnings per share ratio(EPS).
The sample data collected from one markets for the time period of five years from 2009
to 2013. Tables are used to show the results so that it could be easily understandable for
the layman investors, who even don’t have much knowledge of finance. Quantities
research has been carried out.
Results – In developed market higher percentage of debt are used and in developing
country the average utilization of debt is lower than developed country percentage. This
study concluded that the in both markets the return on assets and return on equity has
statistically positive and significant relationship with capital structure and earnings per
share have positive but insignificant relationship with capital structure.
Originality/value – This is the first study that conducted on kse 100 index and concludes
the result on comparative basis it is being done for the 1st time and all the data has been
collected by the researcher form secondary source.
