Standard Industry Classifications, How are you doing compared to others?
Standard Industry Classification codes (SIC) are used for financial statement
“benchmarks” analysis. Your company’s financial results would need to be
compared to others. SICs provide the format to compare a particular company’s
financial data to their respective SIC-industry averages.
Explain how you would use SIC codes to analyze a Company Xs Accounts Receivable
Turnover of four times per year versus a SIC rate of eight times per year.
STUDENT RESPONSE TO ORIGINAL QUESTION;
SIC codes purpose is to identify companies with their primary economic
activity. It is important to evaluate the performance and stability of a
business and to know
how a company is doing compared to other companies. Common sizing
financial statements is perfect for comparing companies and finding
trends within a company. I would use SIC codes to analyze Company X’s
accounts receivable turnover of
four times per year versus a SIC rate of eight times per year
by using the account receivable ratio calculation. It is calculated by
dividing sales revenue by average
accounts receivable. This is how the company would be able to determine
what is best and whether or not it’s four or eight times per years.
PROFESSOR QUESTION NEEDS ANSWERED:
Here is a question for you. Are all companies with the same SIC Code in the same business? Explain