Should You Consider Company Size When Making Ratio Comparisons?

Both the analysis of information for the approval of a loan and outside benchmarking can involve the use of ratios. In competitive benchmarking, ratios are one type of information used to compare your client company with a best practices company. The Current Ratio, a measure of liquidity, and the De...

Full description

Saved in:
Bibliographic Details
Published in:The National Public Accountant 2000-02, Vol.45 (1), p.8
Main Authors: Huff, Patricia Lee, Harper, Robert M, Eikner, A. Elaine
Format: Article
Language:English
Subjects:
Accountants
Accounting
Benchmarks
Best practice
Competition
Corporate finance
Current liabilities
Financial analysis
Financial management
Methods
Ratio analysis
Ratios
Shareholders equity
Size of enterprise
Small business
Stockholders
Websites
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Both the analysis of information for the approval of a loan and outside benchmarking can involve the use of ratios. In competitive benchmarking, ratios are one type of information used to compare your client company with a best practices company. The Current Ratio, a measure of liquidity, and the Debt Ratio, a measure of solvency, are examined for 2 large sets of public companies categorized as Small Companies and Large Companies. From this examination, systematic differences in the ratios for these 2 sets of companies are documented. Some surprising results in the frequency of extreme values for Small Companies are found.
ISSN:0027-9978