The Effect on Financial Ratios to Predict Company Profits and Stock Returns

Document Type : پژوهشی

Authors

Mohammad Lagzian

Javad Baghaei

Mohammad Hossein Homayoni Rad

ferdowsi

https://doi.org/10.22067/pm.v18i1.27593

Abstract

Optimized decision making in the market of stocks and bonds needs utilizing
suitable tools and skills in order to choose the best choices for investment. The most
important financial information of corporations is their financial reports that help
analyzing basics of stocks.
Current research by basing basic information of corporation’s financial reports, has
tried to examine traces of 10 instances of the most important financial ratios in the
prediction of oncoming efficiency and profit of 252 companies out of those
companies in the stock market of Tehran that their financial reports in a 6 year
period (2001-2006) have been available.
Research results show that profitability ratios and activity ratios can be proper
predictive of oncoming efficiency in the stock market of Tehran. Nonetheless there
is not a meaningful relationship between financial ratios and oncoming profits; that
this may be due to smoothing of profits in Iranian companies.

Keywords

fundamental indicator

oncoming efficiency and profit

Investment

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