Interplay between Ratio Analysis Techniques and Transfer Pricing

Margin-based analysis under transfer pricing involves the use of various profit level indicators or ratios. Thus, understanding of ratio analysis techniques plays an important role in transfer pricing analysis. There are certain ratios which – although very useful – are not frequently used by transfer pricing practitioners, namely the Altman Z-score ratio, the Berry ratio, the operating profit to value added expenses ratio and so on. This article discusses usage and applicability of such uncommon ratios in transfer pricing analysis.