Beaver, William H., "Financial Ratios as Predictors of Failure", Journal of Accounting Research, Vol. 4, Supplement, (1966), pp. 71-111.
Introduction: At the turn of the century, ratio analysis was in its embryonic state. It began with the development of a single ratio, the current ratio, for a single purpose -- the evaluation of credit-worthiness. Today ratio analysis involves the use of several ratios by a variety of users -- including credit lenders, credit-rating agencies, investors, and management. In spite of the ubiquity of ratios, little effort has been directed toward the formal empirical verification of their usefulness.