Benchmarking Company Performance

Financial analysis of company performance requires the calculation of standard accounting ratios such as liquidity ratio, current ratio and profitability ratios. There are many ratios which can be legitimately used in the analysis of financial statements but the key thing you will need, is a suitable benchmark of the value of each financial ratio for similar companies. This is exactly what you are able to view, print or export from the Industry Watch Service.

Selection of suitable accounting ratios

Accounting Ratios for company benchmarking

With a suitable industry benchmark you can see for example not just that the company has a current ratio of say 1.2 but how this value compares with other companies in the sector. So if the industry average for a company of this size in this sector is 1.4 then the company is under performing on this measure but if it is 1.1 then it is over performing. Another important part of a financial statement analysis is how the accounting ratio is changing with time. The Industry Watch Service provides the key industry average benchmarks for the latest six year period. Trends in the accounting ratios provided show what is happening in the sector as a whole. These market trends can be compared with how any individual company is performing.

Independent Industry Averages

Trend analysis graphs like the one above are a powerful tool for financial analysis. They highlight immediately the areas where a management team can focus energy to improve a firms' performance. Of course you can only do this if you have confidence in the validity of the industry averages being used as a benchmark. The Industry Watch Service contains the executive summary from own independent research of UK industry sectors. We have been providing these industry statistics since 1991. Uniquely we have not used SIC codes to compile our listings for the sectors since we feel these are not focused enough to provide meaningful results. Sometimes there is nothing better but check out the SIC of a few firms at Companies House and you will see how vague the classifications can be. Over 21,000 customers agree that the right company groupings provide the key financial ratios and have used the reports which underlie this service.

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