Financial Ratios by Industry
Ratios are quantitative indicators of financial strength and operating success. The sources listed in this guide provide ratios for entire industries or groups of companies. Grouping companies into industries was done according to the Standard Industrial Classification (SIC) system established by the U.S. Government until 1997, when it was replaced by the North American Industry Classification System (NAICS). Conversion tables may be found at http://www.census.gov/epcd/www/naics.html. Industry ratios thus provide half of the information needed to compare the performance of a particular company to an industry as a whole. NAICS Classification Manual Standard Industrial Classification Manual AUD & SCH REF HF1042 .N67 2002 SCH REF HF1042 .S73 1987
The Three Most Important Sources for Financial and Operating Ratios
The major sources for industry ratios are books published by Dun and Bradstreet (D&B), Robert Morris Associates (RMA), and Leo Troy. D&B gives ratios for the largest number of industry groups. RMA gives the largest number of ratios and also provides figures for the preceding five years. Troy's Almanac gives the most detailed income statement ratios and its figures are derived from the largest database. All 3 give ratios and other financial information for U.S. public corporations only. Industry Norms and Key Business Ratios (“D&B”) AUD & SCH REF HF5681 .R25 I524 14 ratios for about 800 selected four-digit SIC codes. Based on Dun & Bradstreet’s own database of credit reports, this includes more industry groups than RMA or Troy, but less information about each group.
RMA Annual Statement Studies (“RMA”) SCH REF HF5681 .B2 R58 17 ratios for about 350 selected four-digit SIC codes. Tables include quartile measures and industry-wide figures for total sales and assets. An excellent introduction defines and explains each ratio. RMA's Annual Statement Studies is a little tricky. First, go to the page which lists the SIC codes and the corresponding page numbers. Then turn to the corresponding page. To read the report, go to the column in the middle of the book, entitled “Comparative Historical Data”. From this column, select the year that you need. The last five years are listed. Match the year with the type of data needed
Almanac of Business and Industrial Financial Ratios (“Troy”) AUD & SCH REF HF5681 .R25 I524 10 ratios for about 180 selected four-digit SIC codes including a detailed breakdown by size of assets owned by the enterprises. Figures are based on IRS annual statistics, which provide a larger database than that used by either D&B or RMA, but these statistics are slow to appear and provide no balance sheet data. The income statement ratios, however, are very detailed. Trends in selected ratios and factors over a ten-year period are shown for each industry group.
Roosevelt UniVersity Library Murray-Green Library (Chicago) 312-314-3643/3644, E-mail: refdt@roosevelt.edu McCormick Tribune Library (Schaumburg) 847-619-7980, Email: rbnlib@roosevelt.edu 4-06
2
Where to Look to Find More Ratios
Hoovers Online: Using the library website as a gateway… Click on financials in a company report. Click on “Competitive Landscape” to find a company’s most recent ratios as compared to its top two competitors, the industry as a whole, and the entire U.S. stock market. Hoovers’ Ratios: Gross Profit Margin, Pre-Tax Profit Margin, Net Profit Margin, Return on Equity, Return on Assets, Return on Invested Capital, Price/Sales Ratio, Price/Earnings Ratio, Price/Book Ratio, Price/Cash Flow Ratio, Current Ratio, Quick Ratio, Leverage Ratio, Total Debt/Equity, Interest Coverage, various Per Share measures, and various Growth measures. Mergent Online: Using the library’s subscription… Search for your company, then under the “Company Financials” tab, choose “Ratios”. You may also generate a multiple company comparison sheet: search by SIC code, check the box by those companies that you wish to compare, then click on “Click Here” to add the currently selected companies. Hover over the word “expand” by the “Company Analysis List” at top right, then choose “Create Comparison Report”. Under “Category”, choose “Ratios”; then under “Sub-Category”, pick the ratios you wish to compare; then click the “Add Report Item” button (one ratio at a time). Mergent’s Ratios: Current Ratio, Debt/Total Assets, EBITDA of Revenue, Effective Tax Rate, Gross Margin, Interest Coverage, Operating Margin, Pre-tax Margin, Profit Margin, Quick Ratio, Return on Assets, Return on Equity, Revenue/Total Assets, Revenues/Working Capital, Total Liabilities/Equity, Working Cap./Total Assets. Standard & Poor’s Industry Surveys (AUD & SCH REF HC106.6 .S74) also provides key statistics and ratios pertinent to each industry profiled. Companies are compared to other companies rather than to the industry as a whole. Reuters Investor (formerly Market Guide/MultexInvestor) = http://www.reuters.com. Reuters and other websites also provide company ratios. Market Guide requires a registration for some of its free services. To search: Type in a company name, then click on “Ratios” from the list at left. Gives company, industry, sector, and S&P 500 ratios. The site is free but you must register. Many trade associations and other specialized organizations also publish financial ratios, and ratios sometimes appear in newspaper and journal articles.
Other Sources of Industry Statistics
The Statistical Abstract of the United States (REF.HA202 .A36) is a great starting place for finding general information on an industry. http://www.census.gov/prod/www/statistical-abstract-04.html A Canadian version is also available on the web. It is titled Strategis http://strategis.ic.gc.ca/. The U.S. Bureau of the Census does an Economic Census every five years in years ending in 2 and 7. They provide extensive data on U.S. industry, sales, employment and concentration ratios. http://www.census.gov/econ/census02/. In the years between the censuses the Bureau publishes the Annual Survey of Manufacturers at http://www.census.gov/econ/overview/ma0300.html and the Annual Survey of Retail Trade at http://www.census.gov/econ/www/re0200.html. Current Industry Reports at http://www.census.gov/cir/www/index.html.
Roosevelt UniVersity Library Murray-Green Library (Chicago) 312-314-3643/3644, E-mail: refdt@roosevelt.edu McCormick Tribune Library (Schaumburg) 847-619-7980, Email: rbnlib@roosevelt.edu 4-06
3 The Manufacturing Census also provides information about the concentration of certain industries (what percentage of the total industry sales are due to the largest 5,10,25,50 companies). “Concentration Ratios" indicate what percentage of the total business in a four digit SIC code is being done by the largest firms in the industry. The Manufacturing Census report is at http://www.census.gov/mcd/. Concentration ratios can be found at http://www.census.gov/epcd/www/concentration.html.
Where to Find Particular Elusive Ratios
Fixed Asset Turnover: Troy. Debt Ratio: RMA & Troy. Times Interest Earned: use “EBIT/Interest” in RMA Return on Common Equity: use either “Return on Equity” in Mergent, Or “Return on Equity Before/After Income Taxes” in Troy.
Roosevelt UniVersity Library Murray-Green Library (Chicago) 312-314-3643/3644, E-mail: refdt@roosevelt.edu McCormick Tribune Library (Schaumburg) 847-619-7980, Email: rbnlib@roosevelt.edu 4-06