Business Reference:
The Top Ten Questions Anyone Can Answer
CARL Conference ABLE Pre-Conference
Pasadena April 22, 2004
Doug Highsmith
California State University, Hayward
Question
2
What
is a financial ratio?
&
Where
can I find standard industry ratios so I can compare
the
performance of my company to others in the industry?
A good overview of financial ratios and ratio analysis can be found in:
Lavin,
Michael. Business Information: how to find it, how to use it.
(Phoenix:
Oryx Press, 1992), pp. 171-176.
As Lavin states, "Ratio analysis compares one item on the financial statement to another, instead of to the whole…[A]ccountants and financial analysts have developed dozens of …standardized ratios for ratio analysis. Ratios may be employed to compare the performance of the company over time, by looking at how its ratios change from year to year. The company's ratios may also be compared to those of its competitors, to similar firms, or to the industry as a whole."
Here's
some additional information from a couple of other sources:
Ratio
analysis
Method
of analysis, used in making credit and investment judgments, utilizing the relationship
of figures found in financial statements to determine values and evaluate risks
and compares such ratios to those of prior periods and other companies to reveal
trends and identify eccentricities.
from:
Friedman, Jack P. Dictionary
of Business terms (3rd ed.). Hauppauge,
NY: Barron's Educational Series, 2000.
Types
of ratios
Liquidity
Ratios: Measures of the ability of the enterprise to pay its short-term
obligations.
Profitability
Ratios: Measures the profits (losses) over a specified period of time.
Coverage
Ratios: Measures the protection of the interest and principal payments
to long-term creditors and investors.
Activity
Ratios: Measures how efficiently the company is employing its assets.
from:
Plank, Tom M. Accounting desk
book: the accountant’s everyday instant answer book (10th ed.). Englewood Cliffs, NJ: Prentice Hall, 1995.
Selected
Print Sources for Industry Averages & Definitions/Explanations
Financial
Research Associates. Financial studies of the small business.
Winter Haven, FL: Financial Research Associates, annual.
Industry
norms and key business ratios, one year. Murray Hill, NJ: Dun & Bradstreet Credit Services, annual.
RMA annual statement studies. Philadelphia: Robert Morris Associates, annual.
(Standard
& Poor's) Analyst's handbook. New York; Standard & Poor's Corporation,
annual.
Standard
& Poor’s Industry surveys. New York: Standard & Poor’s Corp., quarterly.
Troy,
Leo. Almanac of business and financial
ratios. Englewood Cliffs, NJ: Prentice-Hall, annual.
Value
Line Investment Survey. New York: Value Line, weekly.
Additional
Sources for Definitions/Explanations of Ratios
Fridson,
Martin. Financial statement analysis: a practioner’s
guide. New York: J. Wiley & Sons, 2002.
Friedlob,
George T., Franklin J. Plewa. Understanding
balance sheets. New York: J. Wiley
& Sons, c1996.
Gates,
Sheldon. 101 business ratios: a manager’s
handbook of definitions, equations, and computer algorithms.
Scottsdale, AZ: McLane Publications, c1993.
Free
Web Sites
Sites
Maintained by Academic Libraries
Financial
ratios: a guide to library resources. University Libraries, University of Minnesota.
Last updated: 1/04. busref.lib.umn.edu/tools/finr.html
Financial
ratios: a Pollack Library research guide to business resources.
Pollack Library, California State University,
guides.library.fullerton.edu/business/topics/business_ratios.htm
Financial
ratios: resources guide. Howard Ross Library of Management, McGill
University. Last updated: 2/29/00.
www.library.mcgill.ca/manage/userguides/RATIO-F.htm
Sources
in financial ratios. Concordia University
Libraries. Last updated: 11/03.
library.concordia.ca/collections/subpages/FinancialRatios.pdf
Weir,
Katherine M. Business ratios.
Milner Library, Illinois State University. Last updated: 12/22/03.
www.mlb.ilstu.edu/ressubj/subject/business/ratio.htm
Other
Sites
Key ratios. MSN Money.
moneycentral.msn.com/investor/invsub/results/compare.asp?Symbol=KEY
Useful business statistics. BizStats.com.
Subscription/Fee-Based
Web Sites
Industry
Averages
D&B
key business ratios online
Ratios
for Individual Companies
Factiva
Question 4
How can I locate a publicly traded company’s SEC filings?
&
When I do, how can I tell what each type of report is
for?
To
find standard SEC filings, look online. The print sources listed below (our old
friends Lavin & Plank)
are intended to provide an introduction to SEC
filings and an overview of what type of information can be found in the different
types of filings.
Selected Sources
Print Sources
Chapter
11: "Special investment situations," in:
Lavin, Michael. Business
Information: how to find it, how to use it (2nd edition), pp. 227-248. Phoenix:
Oryx Press, 1992.
Chapter
16: "The Securities and Exchange Commission - disclosure system and filing
requirements" in:
Plank, Tom M. Accounting desk book: the accountant's
everyday instant answer book (10th ed.), pp. 341-389. Englewood Cliffs, NJ:
Prentice Hall, 1995.
Free
Web Sites
(search the) EDGAR database. U.S. Securities and Exchange Commission.
www.sec.gov/edgar/searchedgar/webusers.htm
Form
types used for electronic filing on EDGAR. U.S. Securities and Exchange Commission.
www.sec.gov/info/edgar/forms/edgform.htm
Form types (definitions). EDGAR online.
www.edgar-online.com/formdef.asp
FreeEDGAR
Glossary of SEC filing types. Maxwell Technologies.
www.maxwell.com/company/investors/sec_filings_definitions.html
Subscription/Fee-Based
Web Sites
EDGAR Online.
www.edgar-online.com/start.asp
NOTE:
The services listed below all provide links to EDGAR filings, along with additional
company financial data.
Factiva
LEXIS/NEXIS
Mergent
Online
Question 8
How can I find the most recent changes in accounting
standards?
A quick overview of the process by which U.S. accounting standards are promulgated can be found in (you guessed it):
Chapter
20: "Accounting and Taxation" in:
Lavin, Michael. Business Information:
how to find it, how to use it (2nd ed.), pp. 452-472. Phoenix: Oryx Press,
1992.
&
Chapter 3: "who determines standards?" in:
Plank,
Tom M. Accounting desk book: the accountant's everyday instant answer book
(10th ed.), pp. 47-59.
Englewood Cliffs, NJ: Prentice Hall, 1995.
As is discussed by Lavin, the current authority for establishing generally accepted accounting principles (GAAP, for short) for the U.S. is the Financial Accounting Standards Board (or FASB - pronounced "FAS-bee"). Information from FASB on newly-issued and recently-modified accounting standards can be found both in print and online…
Selected
Print Sources
Financial
Accounting Standards Board. Statement of financial accounting standards.
Stamford, CT: The Board (irregular).
Financial
Accounting Standards Board. Accounting standards: current text…
Stamford, CT: The Board; New York: Distributed by McGraw-Hill (annual).
Financial
Accounting Standards Board. Accounting standards: original pronouncements.
Stamford, CT: The Board; New York: Distributed by McGraw-Hill (annual).
Web
Sources
FASB statements & concept statements: full text, summaries & status. Financial Accounting Standards Board.
AICPA Online. American Institute of Certified Public Accountants.
RIA
Checkpoint (fee-based)
LEXIX/NEXIS
(fee-based)