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Financial Ratios

Posted: Oct 1, 2012

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Introduction Up Arrow

Interpreting Ratios Up Arrow

In addition to listing industry ratios, the following books also include guidelines for interpreting ratios:

  • D&B Financial Ratios: Industry Norms & Key Business Ratios . Preface.
    Ref Reserve HF5681 R25 I52x (Service Desk, Folsom Library) Current 3 years at Service Desk; Earlier editions on the 3rd floor, Folsom Library.
  • RMA Annual Statement Studies: Preface
    Ref Reserve HF5681 B2 R6x (Service Desk, Folsom Library)Current 3 years at Service Desk; Earlier editions on the 3rd floor, Folsom Library.

For more information about Financial Ratios:

  • R3 = Ratios, Ratings & Reference. Location Ref Z711.6.B8 R87x 1996 (Main Floor, Folsom Library)
  • Handbook of Business Information. (pp. 200- 207.) Location: Ref Desk Z 7164 C81 S7796 2004(Reference Desk, Folsom Library)

Sources for Company Ratios Up Arrow

  • Use Mergent Online Rensselaer Only
    Directions: Go to library home page. Click on articles-journals tab. Select Business, Management from the Article Databases by Subject pull down menu.
  • Enter company name and click on Search button. Click on company name that best matches your search.
  • Click on Company Financials button. Click on Ratios link.

Calculating Company Ratios:
Using Consolidated Financials Up Arrow

You will need to know the formulae for industry ratios. You will also need to consult a company's "consolidated financials" to calculate a specific ratio for a company.

Formulae for Ratios

  • See Preface of either RMA Annual Statement Studies and/or D&B Financial Ratios located at the Service Desk on the Main Floor of Folsom Library.
  • Locate the Formula for the Ratio in Question.

Consult Consolidated Financials for a Specific Company:
Locate the Financial Items Needed for Calculating the Needed Ratio

  • Go to library home page. Click on articles-journals tab. Select Business, Management from the Article Databases by Subject pull down menu.
  • Click on Mergent Online.
  • Enter company name in search box. Click on Search button. Click company name that best matches your company. Click on Filings tab. Click on Edgar Search link.
  • Click on Company Name or Ticker radio button and enter company name.
  • From Filing Date Search section, select radio button for Last 12 Months. From the Filing Type pull down menu, select 10-K. Click on Search button. Select HTML. Use table of contents to navigate to 10-K, Part II, Item 8.

Finding Industry Ratios Up Arrow

Using SIC/NAICS codes

Introduction to Management Students should use the SIC and NAICS codes they have selected for their companies and industry.

  • Industry ratios are classified by either SIC or NAICS codes. The US government developed these systems in order to provide a standard method for collecting and analyzing economic information.

The following sources list industry ratios:

  • D&B Financial Ratios: Industry Norms & Key Business Ratios Location: Ref Reserve HF5681 R25 I52x (Most recent three editions at Service Desk, Folsom Library) Earlier editions on the 3rd floor, Folsom Library.
  • RMA Annual Statement Studies Location: Ref Reserve HF 5681 B2 R6x (Three most recent editions at Service Desk, Folsom Library); Earlier editions on the 3rd floor, Folsom Library.

Quartiles Up Arrow

For ratios expressed as quartiles, please consult these books:

  • RMA Annual Statement Studies Ref Reserve HF 5681 B2 R6x (Three most current years - Service Desk, Folsom Library) Earlier editions on the 3rd floor, Folsom Library
  • Industry Norms & Key Business Ratios (Dun & Bradstreet) Ref Reserve HF5681 R25 I52x (Three most current years - Folsom Library, Service Desk) Earlier editions on the 3rd floor, Folsom Library.

Figures in the ratio tables are broken down for all companies sampled into:

  • Median - the midpoint of all companies sampled.
  • Upper Quartile - the mid-point of the upper half of the companies sampled.
  • Lower Quartile - the mid-point of the lower half of the companies sampled.

Please note:

  • Upper quartile figures represent the best condition for any given ratio.
  • Upper quartile figures are not always the highest numerical value.
  • Lower quartile figures are not always the lowest numerical value.

Colette O. Holmes, Management Librarian, Rensselaer Libraries, Troy, NY

Acknowledgments: The following sources were consulted to prepare this guide:

  • Encyclopedia of Banking & Finance. 10th ed. Charles J. Woelfel, editor. Chicago : Probus Publishing Co., 1994.
  • Strauss's Handbook of Business Information: A Guide for Librarians, Students, and Researchers by Rita Moss. 2nd ed. Englewood, CO: Libraries Unlimited, 2004. pp. 200-207
  • R3 = Ratios, Ratings & Reference. Anne L. Buchanan, editor. Chicago : American Library Association, Reference and User Services Association, 1996.
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