Cross-Sectional Ratio Analysis

Cross-Sectional Ratio Analysis

A method of analysis that compares a firm's ratios with some chosen industry benchmark. The benchmark usually chosen is the average ratio value for all firms in an industry for the time period under study.

Cross-Sectional Ratio Analysis

The analysis of a financial ratio of a company with the same ratio of different companies in the same industry. For example, one may conduct a cross-sectional ratio analysis of the debt ratios of multiple companies in the telecommunications industry. Quite simply, one does this by taking the debt ratios of each company and comparing them to one another. An analyst does this in order to find the company with healthiest financial status. This is helpful in making informed investment decisions.