5.4 Longitudinal vs. Cross-sectional Analysis (Example)

Definitions:

    • Longitudinal:
      • Different times
        • Over time
      • Same company
    • Cross-sectional:
      • Same time
      • Different companies
        • Company-to-company

In all instances the ratios presented will be the same.

Exercise: Describe the longitudinal and cross-sectional relationships for the profitability ratios in the table below.

 

Description:

      • Both ABC and XYZ Corporations are more profitable now than then.
      • XYZ is more profitable both now and then than ABC.

 

Financial Ratios Do Not Provide Answers

Col. Jessup (Jack Nicholson): You want answers?
Lt. Kaffee (Tom Cruise): I think I’m entitled to…
Jessup: You want answers?
Kaffee: I want the truth!
Jessup: You can’t handle the truth!

-A Few Good Men (1992)

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Introduction to Financial Analysis Copyright © 2022 by Kenneth S. Bigel is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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