Financial proportion analysis is known as a technique for planning to help translate financial accounts and to decide the inbuilt value of any security by careful examination of key worth drivers such as risk, progress, and competitive position. Different ratios can be calculated through the financial accounts. These proportions will then support us to examine the company's performance over a quantity of periods simply by comparing similar ratios in previous years' accounts as well as the accounts of other businesses operating in a similar environment (Most common benchmarks are sector leaders and industry averages). Financial percentage analysis delivers essential details and provide (Investors, Stockholders, lenders, organization management, Fundamental analystsвЂ¦. ) with a lot of different contexts for different varieties of decisions.
1 . 1 Declaration of the Problem
The enormous range of financial proportions used by monetary managers and financial experts and their romantic relationship with share return is the main problem in interpreting the monetary statements. Based on, the ultimate target of financial managers is to take full advantage of the useful their stockholders; financial managers must be familiar with impact with their managerial decisions on their company's financial statements and financial ratios deducted which will therefore affect the inventory price with their company. Interpretation such a wide array of percentages distracts focus from the best factors that affect share prices.
1 . 2 Purpose of the study
Numerous studies such as Timo Salmi (1990) were conducted to reduce the information load resulting from computing a large number of percentages and categorize those proportions that were thought valuable. This kind of study aims to identify individuals variables which can be most relevant to the stock earnings of pharmaceutical sector in Egyptian stock market.
1 . a few Statement of objectives
This kind of study make an attempt to achieve the next objective:
-The most relevant independent variables (financial ratios) with stock earnings as a centered variable.
FINANCIAL RATIOS AND STOCK EXCHANGE
2 . 1 Literature Review
The primary goal of the research is to evaluate the relationship among common economic ratios as independent parameters and stock returns with the pharmaceutical firms as reliant variable. The relation between financial statement information and stock go back was reviewed by Et and Penman (1989) who also observed comes back to expense strategies which can be based on a measure that summarizes the knowledge in financial transactions to identify the kind of financial ratios. Their research indicate which the predicted earnings can not be explained by return centered risk measures and that financial statements capture fundamentals that are not reflected in stock rates. The effects of the examine suggest that it is also possible for traders to make extra profits applying publicly obtainable information. Lately, the relation between economic statement data and stock return was extended simply by Holtausen and larcker (1992) who determine value-relevant basic principles in the framework of a return-fundamentals relation. Holtausen (1992) reviewed the ability of accounting info to generate lucrative trading strategies (using 60 accounting ratios). The extra returns were observed in the fourth month pursuing the company's monetary year end. The results of the study suggest that the trading strategy was able to generate significantly irregular returns throughout 1978-1988. Precisely the same issue was examined later on by Lev and Thiagarajan (1993) who have used critical ratios since the basis of analysts' explanation of different proportions to identify the worthiness relevance in the financial proportions and their effectiveness in secureness valuation. Afterward, Belkoui (1997) employed the most popular financial percentages to show the worthiness relevance, where popularity of these types of financial percentages is matched by way of a usefulness in security valuation. He demonstrates value significance of well-liked...