![Industry-Specific Ratios [LO2] There are many ways of using standardized financial information beyond those discussed in this chapter. The usual goal is to put firms on an equal footing for comparison purposes. For example, for auto manufacturers, it is common to express sales, costs, and profits on a per-car basis. For each of the following industries, give an example of an actual company and discuss one or more potentially useful means of standardizing financial information](https://learnmathstat.com/wp-content/uploads/2024/02/image-10.png)
Industry-Specific Ratios [LO2] There are many ways of using standardized financial information beyond those discussed in this chapter. The usual goal is to put firms on an equal footing for comparison purposes. For example, for auto manufacturers, it is common to express sales, costs, and profits on a per-car basis. For each of the following industries, give an example of an actual company and discuss one or more potentially useful means of standardizing financial information:
1. Public utilities. 2. Large retailers. 3. Airlines. 4. Online services. 5. Hospitals. 6. College textbook publishers.
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- For an electric utility such as Con Ed, expressing costs on a per kilowatt hour basis would be a way to compare costs with other utilities of different sizes
- For a retailer such as Sears, expressing sales on a per square foot basis would be useful in comparing revenue production against other retailers.
- For an airline such as Southwest, expressing costs on a per passenger mile basis allows for comparisons with other airlines by examining how much it costs to fly one passenger one mile
- For an on-line service provider such as AOL, using a per call basis for costs would allow for comparisons with smaller services. A per subscriber basis would also make sense.
- For a hospital such as Holy Cross, revenues and costs expressed on a per bed basis would be useful.
- For a college textbook publisher such as McGraw-Hill/Irwin, the leading publisher of finance textbooks for the college market, the obvious standardization would be per book sold.
