Included in this guide are resources most commonly used to find Industry Ratios. The resources do not have ratios for individual companies, only industry averages.
Financial ratios are often used to compare a company against an industry average or other companies in order to benchmark or measure a company's performance. Industry ratios are often useful when creating the financial components of a business plan and starting a new company. When using these resources make sure you are comparing similar sized companies. Each resource will give different figures for each industry based upon the average asset size of the companies in the industry.
Users may search data by SIC and NAICS code and line of business. If industry averages are not included in a particular resource, then you could take an average from a list of companies with the same NAICS or SIC code. Consult the Industry & Market Research Guide to learn more about SIC/NAICS codes.
You can’t build a house without the right measuring tools to ensure that the structure is sound and won’t collapse: tape measures, protractors and levels are used to tell construction workers and architects how much material is needed and where everything goes. In the business world, the measuring tools are called financial ratios, and they help you evaluate a financial statement. By learning how to calculate and analyze specific ratios, you can evaluate trends, determine how healthy a business is, and have key indicators as to how the business is performing. They also allow you to make financial comparisons between companies. This video covers the ratios most commonly used to analyze a business. A coproduction of Films for the Humanities & Sciences and MotionMasters.