This research is thus
motivated by the desire to develop an alternative ratio-based methodology that addresses
some of the problems inherent in the use of untransformed ratios while retaining their
utility of convenience.
In this paper, we propose and test such a methodology: a scaled
rank transformation of financial ratios that addresses many of the methodological problems
inherent in financial ratio use as well as certain conceptual difficulties, i.e. the lack
of relative meaning in ratio values when a benchmark is impractical or unavailable.