Table 1 presents descriptive information on the effect of logarithmic, square-root and rank
transforming means, standard deviations, kurtosis, and skewness. An analysis of the statistics for
skewness reveals that all of the accounting ratio sample distributions we examined were
highly skewed, ranging from 15.0708 to 85.0359. Of the commonly used transforms that
we tested, log transforms do substantively reduce skewness in a number of the ratios we
examine (Quick ratio, Dividend Payout, and Growth) and square root transformation
substantively reduces the skewness inherent in the leverage ratio variable. In all cases,
however, only rank transformations completely eliminate skewness, resulting in a symmetric
distribution in all cases.ations on the various distributional moments estimated from our sample, includ-