World Applied Programming, Vol (3), Issue (10), October 2013. 512-521 ISSN: 2222-2510 ©2013 WAP journal. www.tijournals.com 512 Relationship between Financial Ratios and Stock Prices for the Food Industry Firms in Stock Exchange of Iran Mohammad Reza Kohansal Amir Dadrasmoghaddam Komeil Mahjori Karmozdi Abolfazl Mohseni Department of Agricultural Economics, Ferdowsi University of Mashhad, Mashhad, Iran. Department of Agricultural Economics, Ferdowsi University of Mashhad, Mashhad, Iran. Department of Agricultural Economics, Ferdowsi University of Mashhad, Mashhad, Iran. Department of Agricultural Economics, Ferdowsi University of Mashhad, Mashhad, Iran. kohansal@um.ac.ir Abstract: Food stocks in the stock market is one of the serious debate in the industry is considered. The main subject of the relationship between financial ratios and stock prices of companies listed on the Stock Exchange of food. The data from the years 1992 to 2010 were used to stock the food of choice for companies. Financial variables including liquidity ratios (current ratio), the ratio of activity (asset turnover), the profitability (rate of return on assets and return on equity) and financial leverage (debt) and equity prices food stock. Some results indicate that there is a positive and significant response in food prices due to shocks of the current ratio, return on assets and return on equity rate. The results of this analysis also show that in the first period of greatest change in the current ratio is explained by this variable. But this share has been declining gradually. Variance of decomposition of the asset turnover ratio fluctuations in their asset turnover ratio on the performance. Analysis of financial leverage financial leverage on the shock of their impact is an important variable. As was shown, during this period of the shock on their first reaction is positive and significant but fluctuating after that. Keywords: financial ratios, stock prices of food industry, Impulse response, Variance decomposition I. INTRODUCTION Economic development of every country depends on the money and capital markets in the economy of every country. Given the importance of mobilizing the savings of the capital market in the economic activity, it is important to identify the variables affecting the stock price [9]. The most important resource that can give visibility to investors about the company, the financial statements [2]. The financial statements give a decision on the guide. Using financial ratio analysis can be largely attributed to changes in stock prices can be discussed. Gallizo and. Salvador (2006) the relationship between stock prices and accounting variables examined. Their results indicate that firm size and asset turnover ratio is the most relevant factor affecting stock prices. Long Chen (2007) examined the factors affecting the price he pays, and the results show that the stock price has the greatest impact on cash flows. Dimitropoulos and Asteriou (2009) titled "Communication with the financial statements and on stock prices," a survey of 101 companies listed in the Athens Stock Exchange for a period of 10 years accruals simultaneously, for each profit Share and six special relativity as an indicator of stock price manipulation in the financial statements were reviewed. This study indicates that the variable accounting profitability is the most relevant variable. Esmeili (2002) between financial ratios and stock prices in the vehicle industry and has tile industry during the period 1996-2002. Results showed a significant relationship between the independent variables (financial ratios) and its affiliated companies existing there. Rostami (2004) investigated the relationship between financial ratios of listed companies on the Stock Exchange stock returns paid rate. The results indicate that the two levels of firms and industries separately accepted by monitoring the financial ratios used in the rate of return on equity is a meaningful relationship.