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Profitability Ratio SGA Expenses to sales Ratio

QuestionsCategory: Financials QuadrantProfitability Ratio SGA Expenses to sales Ratio
Lim Marko asked 4 years ago

Hi guys, 
Currently i am at the financial Quadrant, Profitability Ratio SGA Expenses to sales Ratio section. 
Currently i am stuck at this statement which i can’t understand:  ” As always, its is best to compare the SGA sales ratio when the industry average is 20% might look good,  but also smell fishy.”
May i know what is “industry average” means?
Hope to hear from you guys soon!!!
Your sincerely 
Marko Lim 
 
 

Lim Marko replied 4 years ago

Sorry i would like to edit the question instead of asking “May i know what is “industry average” means?”,

I would like to ask what is this statement means: “As always, its is best to compare the SGA sales ratio when the industry average is 20% might look good, but also smell fishy.”

Hope to hear from you guys soon

Your sincerely
Marko Lim

Jieren Zheng replied 4 years ago

“Industry average” just refers to the average of company as well as its competitor companies within the same industry. Like SGA Sales Ratio industry average for telcos, are the average SGA Sales Ratio for Starhub, M1 and Singtel.
Usually, companies within the same industry should have somewhat similar industry average metrices, but there are at times that there’s a company which stands out above the others. We find the reason for that, could there be something (technology, efficiency, network, etc) that allows it to stand above the rest? If there is and it is sustainable, perhaps, we have found ourselves a gem. :)

Victor Chng Staff replied 4 years ago

Thank you Jieren :) Great explanation

Jieren Zheng replied 4 years ago

Thank you for your kind words :)

Lim Marko replied 4 years ago

Thanks Jieren Zheng for the explanation !!! it is very clear and detail!!!

Jieren Zheng replied 4 years ago

Glad it helped, Marko :)

1 Answers
Victor Chng Staff answered 4 years ago

 
Hi Marko,
 
Jieren had just done a perfect explanation on what we meant. To add on, if the company cannot explain how they are able to be better than industry average than the financial ratio will seem to be fishy or questionable.
 

Lim Marko replied 4 years ago

Hi Victor,

thanks for the enlightenment!!!