Baseball and Printing: Financial Ratio Analysis
This post was contributed by Stuart W. Margolis, CPA, MT and Suzette Margolis from Margolis Partners, LLC. Together with Printing Industries of America and membership participation, Margolis Partners brings you the annual Ratios Survey. Visit www.printing.org/ratios to learn more or participate in the 2015 Ratios Survey.
For most of us, ratios are not something we think of every day, at least not until springtime and the onset of baseball season. If you want to compare two Major League home-run hitters, you are likely to compare their batting averages. If one is hitting .389 and the other’s average is .236, you immediately know which is doing better, even if you don’t know precisely how a batting average is calculated. When applied to business, think of ratios as “batting averages for business”. In baseball or in business most ratios measure some form of productivity. They generally give an indication of how one result varied in relation to another. Ratios are a tool to make it easier to do an “apples to apples” comparison.
In fact, the classic batting average statistic is:
The number of hits made by the batter, divided by the number of times the player was at bat. (For baseball enthusiasts, those are “official at-bats,” which is total appearances at the plate minus walks, sacrifice plays, and any time the player was hit by a pitch.)
The batting average is thought of as a measure of a baseball player’s productivity; it is the ratio of hits made to the total opportunities to make a hit.
Other baseball ratios include Earned Run Averages, Average Pitching Strikes to Ball Ratio, and more. For some reason, they all make sense to us. Avid fans can visually see each pitch, strike out, and hit so they have a general idea of how players and team are performing.