R-Series Report » Establish Goals

The Purpose Of Establishing Benchmarks Or Goals

In looking at the R-Series Report, you will find 4 basic ratio groups:

  • Liquidity Ratios
  • Capital Structure Ratios
  • Efficiency Ratios
  • Bank Ratios

The first three sections will ask that you input the goal for the upcoming year for each ratio. The last section (Bank Ratio), will ask that you input the Bank’s requirements for each ratio.

The ultimate goal of all this effort is to measure and manage the financial health of the client. Ratio analysis provides a way to do this in a manner that is also conducive to comparison vis-à-vis other firms within and without the client firm’s industrial sector.

The primary purpose of the R-Series Report is to help you identify trends in your business. Is profitability improving? Are your operations becoming more or less efficient? It is important that you identify the ratios that are most important to your business.

But bear in mind that not all ratios will necessarily be of importance to you, but may be quite important to an external party, such as a bank.

You will want to tie your ratios to your Cash Flow Projections and your Flash Report. The value of the ratios you use should be consistent across all of these different financial management and planning tools.

Who Sets Benchmarks Or Goals?

The CFO/controller should both establish the goals and research the industry benchmarks. Goals should be established in conjunction with the Owner(s)/Management’s direction as well as constraints in mind.

Also, with regards to benchmarking, the person may need to go to a public library to access some financial catalogs and resources.

How Are Benchmarks And Goals Set?

Goal Setting

  • Gather historical B/S and I/S info
  • Key in the information into the R-Series Report
  • Discuss with the Owner(s)/Management of the business to see what type of progress they expect in their business.
  • Come up with certain financial goals together with the Owner(s)/Management based on expected performance.
  • Integrate these metrics with the Flash Report. This is important because the R-Series Report is updated only once per year. However, the Flash Report is maintained on a weekly basis.


Use benchmarking to compare companies of various sizes and between various industries. Either make comparisons in dollar terms or on a common-size percentage basis. There are many resources for benchmarking, many of which are proprietary. However, many of these can be accessed either at a university library such as Rice University, University of Houston, or even at a public library:

Small Business Administration (SIC/NAICS Codes)

The SBA has a variety of information on small businesses. However, this particular area describes in detail what an SIC and NAICS code is.

Kauffman Business EKG (Free)

Sponsored by the Kauffman Foundation, this website provides a simple method to compare your client company to similar companies within their industry. You will need to know the SIC/NAICS code for the company.

BizStats.com (Free)

Website provides useful financial ratios, business statistics and benchmarks.

Risk Management Association (RMA)

This hard volume lexicon contains financial ratio benchmarks and also industry measures for cash flows. You will need to pay for this but should be available at the university library.

Ibbotson Associates

This firm provides industry and size specific comparisons for cost of capital and Z-Scores.

Library Resources

  • Industry Norms and Key Business Ratios

Published by Dun’s Analytical Services, Murray Hill, NJ

Financial ratios of 800 different industries. Annual

  • Almanac of Business and Industrial Financial Ratios

Published by Robert Morris Associates, Philadelphia, PA

Contains financial and operating ratios for more than 360 lines of businesses.