This article aims to develop an empirically-based classification of financial ratios for manufacturing firms and to examine whether or not these ratios can be used in differentiating sub-sectors of manufacturing industry. The article involves 160 manufacturing firms which are traded in the emerging Istanbul Stock Exchange (ISE). It covers the period between December 1992 and June 1999, and financial ratios of those companies have been calculated for 14 terms. Factor analysis was applied, both to isolate the independent patterns of financial ratios and to create an empirical classification for them. Factor analysis revealed four common factors, namely profitability, solvency/leverage, liquidity, and activity. The discriminating ability of the independent patterns of the financial ratios has been evaluated by means of the discriminant analysis. The eight sub-sectors of the manufacturing firms were included in the analysis, and it was concluded that those common factors are statistically significant in differentiating the sub-sectors of manufacturing firms of an emerging market.

JEL Codes

G32, L60, O14, O16


Manufacturing, Financial Ratios, Emerging Markets