Looking at the financial information for an industry provides insight into its financial operations. Often financial information is converted into ratios in order to provide a basis for comparison. Typically, for an industry, you will find different types of ratios. These are available from online resources as well as in print resources in the Reference Room of Maag Library. For more information concerning ratios, visit Maag Library’s Financial Ratios Library 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. (Industry Norms & 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. (Industry Norms & 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.
(Almanac of Business & 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. (Almanac of Business & Industrial Financial Ratios)
The reference books listed below contain the financial ratios calculated for various 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. To find an SIC or NAICS industry code, use these websites:
• NAICS: North American Industrial Classification System
• SIC: Standard Industrial Classification
>>To lookup an industry code, please refer to the NAICS website