Antje Mays - Head, Monograph & AV Acquisitions
 

Industry Ratios:

RMA annual statement studies: Ref HF 5681 .B2 .5 -- latest kept at Reference Desk:

  • To use this reference, you'll need to know your company’s SIC and NAICS codes. Everything is self-contained in one thick volume. The industry sectors in this book are organized by NAICS code.
  • Using Apple Computers as an example, the industry codes can be easily obtained from Mergent Online:
    • Search AAPL by ticker symbol, and you'll see a clickable line for Apple Computers and SIC 3571.
    • Click, and the summary/start info will show both SIC 3571 and NAICS 334111.
    • If you don't have the ticker symbol, search by company name.
  • Simply leaf through RMA annual statement studies by the NAICS code marked at the top of each page and you'll find assets, liabilities, income data and the following ratios as grouped by RMA:
    • Liquidity ratios:
      • Current
      • Quick
      • Sales / Receivables
      • Cost of sales / Inventory
      • Cost of sales / Payables
      • Sales / Working capital
    • Coverage ratios:
      • EBIT / Annual interest expense
      • Net profit + depreciation, depletion, amortization / Current portion of long-term debt
    • Leverage ratios:
      • Net fixed assets / Tangible net worth
      • Total liabilities / Tangible net worth
    • Operating ratios:
      • % Profit before taxes / Tangible net worth
      • % Profit before taxes / Total assets
      • Sales / Net fixed assets
      • Sales / Total assets
    • Expense to sales ratios:
      • Depreciation, depletion, amortization / Sales
      • Officers’, directors’, owners’ compensation / Sales
  • Note: A nice side benefit of RMA Statement Studies is that the front has a section on each ratio, how it is calculated, and how to interpret the information. This is handy for anyone who may like a refresher.


Industry Norms and Key Business Ratios -- Ref HF HF 5681 .R25 .I53 -- latest kept at Reference Desk:

  • This slim volume has all information in one volume.
  • Unlike RMA, here you will need the primary SIC code (3571, using Apple as an example again).
  • Like the RMA annual statement studies, this book has a section in the front explaining 14 key ratios, how to calculate them, their meaning, and how to interpret them -- grouped as follows (you may find the variations in grouping names interesting):
    • Solvency ratios:
      • Quick ratio
      • Current ratio
      • Current liabilities to net worth
      • Current liabilities to inventory
      • Total liabilities to net worth
      • Fixed assets to net worth
    • Efficiency ratios:
      • Collection period ((accounts receivable / Sales)x365)
      • Sales to inventory
      • Assets to sales
      • Sales to net working capital
      • Accounts payable to sales
    • Profitability ratios:
      • Return on sales
      • Return on assets
      • Return on equity (they alternately name this ratio Return on net worth)
  • Note on all the above ratios: Rather than showing a straight average for the ratios, they are given by upper quartile (UQ), median (MED), and lower quartile (LQ) in order to avoid averaging distortions from unusual statements and/or extreme high-lows skewing the mathematical averages.


Standard & Poor’s Industry Surveys (2-volume set Ref HC 106.6 .S74) -- latest kept at Reference Desk:

  • If you're using this print version for the first time, the content organization may seem a bit disjointed at first. Here’s how to “decode” what’s in the two volumes:
    • Volume 1 is the guide to what can be found in both volumes. Vol.2 is not helpful as a content guide, even for its own content. You'll always need vol.1 for content guidance, even if what you need is in vol.2.
    • Vol.1’s first page has industry sector abbreviations listings.
    • Following pages then alphabetically list included companies noted with their respective industry sectors.
    • Using Apple Computers as an example, it is classified under both Computer hardware (COH) and Computer consumer and internet services (CIS).
    • After the company listing is a breakdown of industry surveys -- this is the place where you'll find out which volume contains your needed industry surveys.
    • For example Apple’s Computer hardware and Computer consumer and internet services are surveyed in detail in volume 2. Sectors are sequenced by publication date (most recent first), so you'll need to keep vol.1 handy to refer to the sector listing in the back. This is especially handy if you need to look up several industry surveys.
    • Industry surveys include narrative surveys and multi-year tables for the following:
      • operating revenues
      • net income
      • return on revenues
      • return on assets
      • return on equity
      • current ratio
      • debt/capital ratio (%)
      • debt as % of net working capital
      • price/earnings ratio (high-low)
      • dividend payout ratio
      • dividend yield (high-low, %).
    • On a side note, you may find the following two items in the front part of volume 1 of interest to get a general sense of where your industry stacks up:
      • S&P GICS composite 1500 sector scorecards: This gives you a feel for how your particular industry (for example, computer hardware and/or internet software & services) stacks up against its broader index (e.g. information technology) or other industry sectors within the broader sector index.
      • S&P GICS composite 1500 valuations: A barometer of aspects such as earnings % change, p/e ratio and p/e ratio compared to S&P 1500, projected growth rate etc for their industry grouping (e.g. information technology) and their sub-industry (e.g. computer hardware).