Fortune 500

Pages:523-524
 
FREE EXCERPT

The term Fortune 500 refers to an annual listing by Fortune magazine of the top 500 public companies in the U.S., as ranked by sales, assets, earnings, and capitalization. This list ranks only public companies, or those which have issued securities through an offering and which are traded on the stock market. This list is important to a number of financial groups, but particularly to investors, who study the performance of these select companies. In addition, academic and business researchers look to these companies to learn about best practices in various industries and to discover the secrets to their business and financial success. The requirements and typical characteristics of Fortune 500 companies can be found at: http://money.cnn.com/magazines/fortune/.

RANKING FACTORS USED IN DETERMINING THE FORTUNE 500

Sales Growth Ranking

Tracking the increase in sales of a company is a way to determine if the company is indeed growing. This is very important to investors. Sales growth is also indicative of the state of the economy. One would expect a company's sales to grow during a healthy period of economic activity. When a company's sales grow faster than the general economy in the markets in which the firm operates, the firm is obviously outperforming the market due to some process within the company. It could be due to a superior quality product, low-cost production or service delivery methods, excellent customer service and support, or innovations in production and/or processing. Companies on the Fortune 500 list typically exhibit more than one success measure that may be important for competitors to emulate.

Assets Ranking

Companies listed on the Fortune 500 usually have large and growing asset balances. An asset is any item of economic value owned by the corporation, including cash, securities, accounts receivable, inventory, office equipment, and property.

Earnings Ranking

A firm's earnings are calculated by subtracting the cost of sales, operating expenses, and taxes from its revenues. Earnings are often the single most important determinant of a corporation's stock price.

Capitalization Ranking

Capitalization is the sum of a corporation's...

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