The Value of Financial Ratios in the Retail Industry in Evaluating Financial Strength

Abstract

This study looks at two categories of retailers to find differences in averages in financial ratios. The first group of retailers has adopted a successful online model that allows consumers to purchase products through websites. The other group of retailers utilizes a traditional brick and mortar model. There’s a comparison between the two groups, with averages calculated to determine which ratios are most valuable to retailers in understanding risk of financial distress and bankruptcy. Operating profit margin, ROE, ROC, cash ratio, and quick ratio are the key ratios.