| Yhteenveto: | The purpose of this study is to examine the relation of growth and the financial ratios of
a company. The theoretical portion of the study focuses on the concept of growth in
entrepreneurship theory. The empirical portion consists of examination of the financial
ratios of 162 Finnish software companies in 2008-2011 by means of quantitative analysis
methods. Statistical analysis methods, including analysis of variance, correlation and
regression analysis, are used in the analysis. The objective of the study is to reveal how
growth affects the financial ratios of a company and which ratios can be used to predict
growth. The effects of companies’ age, geographical location and industrial classification
on their financial ratios are also examined.
The findings of this study reveal that the Finnish software industry inhabits a
considerably high amount of growth companies. Younger companies were found to
exhibit higher growth rates and absolute profitability than older ones. The findings
suggest that a heightened level of cash is tied to the operations of companies exhibiting
an especially slow or fast rate of growth. Companies exhibiting high growth were found
to produce high levels of return on investment, but high growth was also found to put a
company’s short term profitability and liquidity at risk. Only weak correlations were
found between growth and the financial ratios of a company. The regression analysis
revealed that a model combining 10 financial ratios may be used to predict the net sales
growth of a company. Implications and future research proposals are provided.
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