A Sorry State of Affairs: The Problems with Financial Ratio Education
Mankin, J.A. & Jewell, J.J. (2014). A Sorry State of Affairs: The Problems with Financial Ratio Education. Academy of Educational Leadership Journal, 18(4), 195-219.
25 Pages Posted: 3 Oct 2012 Last revised: 20 Jul 2018
Date Written: 2014
This paper examines a large sample of accounting, finance, management, marketing, and financial statement analysis texts. The “top 20” ratios in business textbooks are identified and discussed. The paper finds two major problems with ratio presentation in business textbooks: formula confusion and naming confusion. Many ratios bearing the same name are presented with different mathematical formulas. Only four of the top 20 ratios have 100% consensus on the formula. Many ratios also have several commonly used “aliases” or alternate names. These two issues may cause considerable difficulty for both students and practitioners.
Keywords: financial ratios, financial analysis, business textbooks, financial ratio formulas
JEL Classification: M41, G12, G32
Suggested Citation: Suggested Citation