Many research areas utilizing financial ratios have employed them directly for convenience without considering the statistical and theoretical properties of the ratios themselves. According to the findings of Lev (1969), Lee and Frecka (1983), and Lee and Wu (1988), firms adjust their individual financial ratios toward pre-established target ratios. This study sets industry-average financial ratios as target financial ratios and analyzes the periodic adjustment hypothesis—that firms adjust their financial ratios—using the partial adjustment model employed by Lev. Analysis of six financial ratios over the 15-year period from 1980 to 1994 revealed that the current ratio was consistent with the periodic adjustment hypothesis. Specifically, 42.7% of the cumulative proportion of regression coefficients for the current ratio were significant at the 10% level, consistent with the findings of prior studies. The partial adjustment coefficient, which represents the speed at which financial ratios adjust toward target ratios, was explained by the cost of adjustment, reflecting the difficulty of the adjustment process, and the cost of being out of equilibrium, reflecting the importance of adjustment. The industry-level analysis also revealed that while the industry effects were not clearly evident for all financial ratios, differences in adjustment speed existed across industries.