<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>This study attempts to predict high growth firm (HGF) status with financial ratios. Measures related to the firm’s effectiveness in using assets to generate profits, EBITDA margin, debt ratio, equity-to-debt ratio and return on assets are associated with HGF status. While the financial ratios improve HGF prediction, prediction remains modest (AUC = 0.627). This study suggests it is difficult to assume a very good HGF forecast from only financial ratios; therefore, the recommendation for researchers and policymakers building models for predicting HGFs is to incorporate non-financial ratio variables, like the intangible innovation and team-related variables. Finally, study suggests a standardized reporting of prediction performance metrics in the out-of-sample and out-of-time simulation for HGF prediction studies.</p>
</abstract>

This study attempts to predict high growth firm (HGF) status with financial ratios. Measures related to the firm’s effectiveness in using assets to generate profits, EBITDA margin, debt ratio, equity-to-debt ratio and return on assets are associated with HGF status. While the financial ratios improve HGF prediction, prediction remains modest (AUC = 0.627). This study suggests it is difficult to assume a very good HGF forecast from only financial ratios; therefore, the recommendation for researchers and policymakers building models for predicting HGFs is to incorporate non-financial ratio variables, like the intangible innovation and team-related variables. Finally, study suggests a standardized reporting of prediction performance metrics in the out-of-sample and out-of-time simulation for HGF prediction studies.

Can we predict high growth firms with financial ratios?

Assistant Professor of Economics Faculty of Economics, Business and Tourism

Financial Internet Quarterly

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Can we predict high growth firms with financial ratios?"}

This study attempts to predict high growth firm (HGF) status with financial ratios. Measures related to the firm’s effectiveness in using assets to generate...

Can we predict high growth firms with financial ratios?

Data publikacji: 13 kwi 2022

Zakres stron: 66 - 73

Otrzymano: 01 mar 2022

Przyjęty: 21 mar 2022

DOI: https://doi.org/10.2478/fiqf-2022-0006

Słowa kluczowe
high growth firms, prediction, financial ratios

© 2022 Stjepan Srhoj, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Can we predict high growth firms with financial ratios?

Data publikacji: 13 kwi 2022

Zakres stron: 66 - 73

Otrzymano: 01 mar 2022

Przyjęty: 21 mar 2022

DOI: https://doi.org/10.2478/fiqf-2022-0006

Słowa kluczowehigh growth firms, prediction, financial ratios

© 2022 Stjepan Srhoj, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Słowa kluczowe
high growth firms, prediction, financial ratios