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Financial & Industry Operating Ratios

 
Financial Ratios
Reference Room Resources
General Collection Resources
Business Databases
Web Resources

Christine Adams, Business Liaison Librarian
Maag Library, Reference Department
Phone: (330) 941-3680
Email: cmadams02@ysu.edu

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Financial Ratios

Analyzing the financial information for a company provides insight into its financial operations. Often financial information is converted into ratios in order to provide a basis for comparison. Comparing one company's financial ratios with those of other companies within its industry can provide an accurate picture of the company's financial health. When researching a company's standing within its industry, it is helpful to know its SIC and/or NAICS industry codes. Many of the financial ratio resources are organized based on these codes. For more information, see the Industry Codes section on Maag Library's Industry Research Subject Guide.

Examples of some of the ratios you will encounter include:

  • CURRENT RATIO: Current Assets divided by Current Liabilities. This ratio reveals the protection afforded short-term creditors in cash or near-cash assets. It shows the number of dollars of liquid assets available to cover each dollar of current debt. The larger the ratio, the greater the liquidity. (From Industry Norms and Key Business Ratios)

  • QUICK RATIO: Cash plus Accounts Receivable divided by Current Liabilities. This ratio measures the degree to which current assets cover current liabilities. The higher the ratio, the more assurance exists that the retirement of current liabilites can be made. (From Industry Norms and Key Business Ratios)

  • INVENTORY TURNOVER: A measurement of the liquidity of inventory computed by dividing the Cost of Goods Sold by the Average Inventory. The result shows the number of times that the average inventory can be converted into receivables or cash. Typically, the higher the turnover rate, the more likely profits will be higher. (From Almanac of Business and Industrial Financial Ratios)

  • RECEIVABLES TURNOVER: Obtained by dividing Sales Average by Net Receivables. This ratio measures the liquidity of accounts receivable. It indicates the average collection period throughout the year. (From Almanac of Business and Industrial Financial Ratios)

  • RETURN ON ASSETS: Net Profit After Taxes divided by Total Assets. This ratio is the key indicator of profitability for a firm. It matches operating profits with the assets available to earn a return. Companies efficiently using their assets will have a relatively high return while less well-run businesses will be relatively low. (From Industry Norms and Key Business Ratios)

  • RETURN ON EQUITY: Net Profit After Taxes divided by Net Worth. This ratio is used to analyze the ability of the firm's management to realize an adequate return on the capital invested by the owners of the firm. Generally, a relationship of at least 10% is regarded as a desirable objective for providing dividends plus funds for future growth. (From Industry Norms and Key Business Ratios)

  • OPERATING MARGIN: Net profit before taxes plus interest expense and depreciation, the result divided by net sales and multiplied by 100 to provide a percentage. (Taken from 101 Business Ratios)

  • PRICE TO EARNINGS: Per share market price of company's stock divided by net profit after taxes per share. (Taken from 101 Business Ratios)

  • DIVIDEND YIELD: Dividends paid (annualized) divided by stockholders' equity, multiplied by 100 to provide a percentage. (Taken from 101 Business Ratios)

 
Reference Room Resources

The sources listed below, located in Maag Library's Reference Room, are useful sources for financial ratio research. They contain the financial ratios calculated for various companies and industries. If you have questions about what the ratios mean, check the introduction to each volume to find a description of the different ratios and how they are calculated. Reference materials are for in-library use only.

  • Almanac of Business and Industrial Financial Ratios: 2008 Edition / Leo Troy
    READY REF HF5681.R25 A45 2008 (Held at Reference Desk)
    Provides a precise benchmark for evaluating an individual company's financial performance. The performance data is derived from the latest available IRS figures on U.S. and international companies, and tracks 50 operating and financial factors in nearly 200 industries. Covers all of North America using NAICS data.
    Previous issues (1992 through 2007) can be found in the General Collection OVERSIZE HF5681 .R25 A45 (Floor 3A).

  • Industry Norms & Key Business Ratios: Statistics on Over 800 Lines of Business / Dun & Bradstreet
    READY REF HF5681 .R25 I53 2005/2006 (Held at Reference Desk)
    Calculations of the Industry Norms; Calculation of the 14 Key Business Ratios; Industry Norms for Financial Analysis; and Applications by Functional Areas. Made possible through over one million financial statements in the D&B Financial Information Base. This file consists of U.S. corporations, partnerships and proprietorships both public and privately owned, in all size ranges, and includes over 800 different lines of business as defined by the U.S. SIC code numbers.
    Previous issues (1982/1983 through 2004/2005) can be found in the Reference Room REF HF5681 .R25 I53.

  • RMA Annual Statement Studies: Financial Ratio Benchmarks 2007-2008 / Risk Management Association
    READY REF HF5681.B2 R6 2007/2008 (Held at Reference Desk)
    The industry standard for comparison financial data. Features data for over 710 industries derived directly from more than 190,000 statements of financial institutions' borrowers and prospects.
    Previous issues (1974 through 2006/2007) can be found in the General Collection HF5681 .B2 R6 (Floor 3A).

  • Mergent's Industry Review   REF HG4961 .M68 2007:Feb-Aug AND 2007:Aug-2008:Feb
    Comprehensive statistical reference containing key financial information, operating data, and ratios on approximately 6,000 companies. The information is arranged by industry, in 137 industry groups, so that not only may the companies be compared with each other, they may also be measured against certain averages for that industry. The statistics are updated twice each year
    A special feature of the Review is the rankings section. All companies in every industry are ranked by eight standard criteria: size is measured by revenues; profitability, by operating profit margin, net income and return on capital; market evaluation of the stock, by price/earnings ratio and yield; and price behavior of the stock, by Mergent 7-Year and 12-Month Price Scores. The financial criteria for rankings in some industries includes working capital, current ratio, cash and marketable securities, inventory turnover, accounts receivable turnover, and spending for research and development as a percentage of sales.

  • Handbook of Business and Financial Ratios   REF HF5681 .R25 T97 1986
    Presents numerous ratios that represent useful and important guidelines in assessing, interpreting, and planning financial data to meet the objectives of managing a business more effectively. Shows you step-by-step how-to-use ratios as a prime tool in isolating, identifying, and highlighting operating performance and financial position events. Complete with 50 models that illustrate how ratios are used for analysis and comparison by period, data element, account description, item variance by management.

  • 101 Business Ratios: A Manager's Handbook of Definitions, Equations, and Computer Algorithms: How to Select, Compute, Present, and Understand Measures of Sales, Profit, Debt, Capital, Efficiency, Marketing, and Investment
    REF HF5657.4 .G38 1993
    Directed primarily to managers of small and medium-sized businesses. The work is organized into two parts. The first introduces the reader to ratio analysis and then describes 101 specific measures, as well as formulas for their computation. The second part is a "how to" section dealing with practical matters associated with the use of ratios.

 
General Collection Resources

Books (print and electronic) about financial ratios can be found through MaagNet, the Maag Library online catalog. Use MaagNet to locate materials available in Maag Library. Search by Author, Title, Keyword, or Subject Heading. Books can also be found through the OhioLINK Catalog. Use the OhioLINK catalog to locate items available through other OhioLINK institutions. Available items can be requested and delivered to Maag Library for checkout. Allow 3-5 days delivery time. For more help finding books, see Find Books.

Some of the general collection resources available through Maag Library concerning financial ratios include:

 
Business Databases

Click on the database titles below if you are in the library or on campus. If you are off campus, click on the Off Campus Access link to authenticate using the library barcode on the back of your YSU ID. Click here for more information about off campus access. To view the complete list of available databases, go to the Maag Library Home Page and click on Research Databases on the left side of the screen under Quick Links.

  • LexisNexis Academic     Off Campus Access      LexisNexis Academic Tutorials
    >>Click on Sources tab, then Companies & Organizations file, then Company Directories & Profiles file. Select Disclosure(R) Online Database-US Public Company Profiles and click on OK-Continue. Enter company name in search box and click on Search. Locate your company in result list and click on company name. Scroll down to Ratios section and click on Download Table for a printable version of that section.

  • Mergent Online     Off Campus Access     Mergent Online User Guide
    Financial Ratios for Companies: Return on Equity, Return on Assets, Quick Ratio, Current Ratio, Long Term Debt to Equity, Total Debt to Equity, Working Capital/Total Assets, etc. Includes up to 30 annual financial ratios for U.S. and international companies.
    >>Search by Company Name or Ticker Symbol. Click on appropriate Company Name. Click on Company Financials tab, then Ratios and/or Analysis tabs. A list of ratios are displayed for the most recent three years. However, you can create your own ratio chart using the last 15 years of financial information. You can also click on Create Reports tab, then Custom Reporting to build a custom report by selecting data items (Profitability Ratios is one option).

  • Standard & Poor's NetAdvantage      Off Campus Access     S&P NetAdvantage User Guide
    >>Click on Companies tab and search for Company Profile by Company Name or Ticker Symbol. Click on Financials on left side of screen and look at chart under "Other Financial Data" for latest six years of ratios, including Return on Equity and Return on Assets.
    >>Click on Stock Reports (HTML or PDF) on left side of Company Profile screen. Page 3 of Stock Report includes sections on "Expanded Ratio Analysis," "Key Growth Rates and Averages," and "Company Financials."
    >>Click on Industries tab and choose an Industry Review OR Sub-Industry Review from dropdown menu. There is a section on Key Industry Ratios and Statistics and a section on Comparative Company Analysis with link to Profit Ratios, Balance Sheet Ratios, and Equity Ratios. Ratios are listed for major companies within the industry for 5-6 most recent years.
    >>Industry Surveys from prior years are also available in print at Maag Library: Surveys from 1995 through 2005 are on Floor 3A at call number HC106.6 .S74.

  • Value Line Research Center     Off Campus Access     Value Line Education     Sample Value Line Stock Page
    >>Financial Ratios for Companies: Click on Standard Edition under Quick Index on left side of the screen. Look Up Company: Enter ticker symbol or company name and click on gold Value Line icon. Click on PDF icon. Company sheets have a chart which includes financial ratios in the center of the page.
    >>Financial Ratios for Industries: Click on Standard Edition under Quick Index on left side of the screen. Click on Look Up Industry. Click on the Industry Report icon for the appropriate industry. Industry sheets display a Composite Statistics chart which includes financial ratios at the lower left of the page.

 
Web Resources

Many websites are available to help you locate information about financial ratios. While there are many reputable sites, there are other sites with information that is questionable or biased. Look at the tips on our Evaluating Print and Electronic Resources page as you search for information online. Meanwhile, here are some sites that are useful for locating accurate industry information: