An Empirical Approach to the Statistical Distribution of Financial Ratios
Javier de Andrés Suárez
This paper identifies the most suitable functional ways of characterising the statistical distribution of various financial ratios for a cross-section of companies. To do this, the paper employs various transformation techniques and normality tests. The main results indicate that the ratios of current assets/sales, quick assets/sales, current assets/current liabilities and quick assets/current liabilities all follow a log-normal distribution. The statistical distribution of quick assets/total assets can be approximated by either a log-normal or a gamma function, while for current liabilities/total assets both normal and gamma curves are suitable. Only a normal distribution fits the ratios of current assets/total assets and working capital/total assets.
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