The Normality of Financial Ratios Distribution: An Empirical Evidence of Malaysian Firms

Abstract

Many prior research regarding financial ratios have shown that financial ratio distributions are not researches suggest that one of the reasons why the distribution is not normal is | he presence of outliers. Some suggest that the data should be transformed to square root | og ft i foun that the distribution snot normal. Knowledge about the distribution of | is important especially in financial analysis. It can aso help us o determine the function ratios. In this research, the distribution of financial ratios from all listed companies in | and financial service industries between 1990-1995 is studied. The esa shows hatall ing industry are not normally distributed, but afte removing the outliers and being | he distribution i cose to norma. As for the financial industry, there re some ratios that | ‘distributed. However, some ratios are still not normal although the ratios are transformed are removed. These findings indicate that using industrial average as a benchmark and | ses is not an appropriate approach when carrying out an analysis connected with financial |