The Financial Ratio Analysis and Company Performance

Abstract

The financial ratio is the financing structure of the company's funding source or the concentrated experience of the equity structure. It not only affects the company's management structure, corporate characteristics and business behavior, but also affects the company's capital cost and company performance. A reasonable financial ratio promotes internal corporate governance and regulates corporate operations. Improving the efficiency of company resource allocation and improving company performance has a total practical significance.

This paper first summarizes and analyzes the literature including the traditional company performance analysis method and the modern evaluation method and then the relationship between domestic financial ratio and company performance. Under relatively perfect capital market conditions, the company's financial ratio has a certain impact on the company's performance. Developed countries have also confirmed this theory in the context of more efficient capital markets, and the relevant research results also indicate that there are differences in corporate financial ratios in different industries. The characteristics of the listed company's operating mode and management methods and financial ratio research objects are in line with the research requirements, so researcher select the company as a research sample. This paper mainly selects the Chinese construction industry as a research sample for analysis. 

The listed companies are taken by this paper in Shanghai Stock Exchange's construction industry as the research object. Use data from 41 construction companies for 2015-2017. First, analyze listed companies' basic status in the construction industry, and understand the differences initially in industry structure. Different from other researchers, this paper chooses a variable, but
chooses the price-earnings ratio as the dependent variable of the study. Theother four financial ratios are independent variables, and the hypothesis is established and the multiple regression analysis that is related to the autonomous variable and the dependent variable is established.