Excerpt from A Simple Theory of Financial Ratios as Predictors of Failure Several years ago William Beaver published a Very interesting article reporting an empirical study of various financial ratios as predictors of failure.1 Using matched samples of failed firms versus non-failed firms, he found that several easily available financial ratios were good predictors of failure, while others, probably more widely used, were mediocre predictors.2 Specifically the criterion ratios cash flow/total assets, net income/total assets, total debt/total assets and particularly cash flow/total debt were good predictors of failure, the latter even up to five years before the event, while such widely used ratios as the current ratio were of only mediocre value until the final year before failure, and even then inferior to the.aforementioned ratios. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.