# eStatement Studies: Interpreting the Data

## Help

For assistance in interpreting the data, while in the database, click the tab marked "About eStatement Studies" for information.  You'll find how ratios are calculated and how to interpret them.  You'll also discover why you sometimes see three numbers or numbers in parentheses.

One of the most common questions is "Why are there three numbers?" The text below is copied from the "About eStatement Studies" tab.

Definition of Ratios

Introduction

Within eStatement Studies, where common size balance sheet and income statement information is presented, you will find a series of ratios computed from the financial statement data.

Here is how these figures are calculated for any given ratio

1. The ratio is computed for each financial statement in the sample.

2. Next, these values are arrayed (listed) in an order from the strongest to the weakest. In interpreting ratios, the strongest or best value is not always the largest numerical value, nor is the weakest always the lowest numerical value. (For certain ratios, there may be differences of opinion concerning what is a strong or a weak value. RMA follows general banking guidelines consistent with sound credit practice to resolve this problem.)

What Are Quartiles?

Each ratio has three points or cut-off values that divide an array of values into four equal-sized groups called quartiles as shown in the graphic below. The quartiles include the upper quartile, upper middle quartile, lower middle quartile, and the lower quartile. The upper quartile is the cut-off value where one-quarter of the array of ratios falls between it and the strongest ratio. The median is the mid-point; that is, the middle cut-off value where half of the array falls above it and half below it. The lower quartile is the point where one-quarter of the array falls between it and the weakest ratio. In many cases, the average of two values is used to arrive at the quartile value. You will find the median and quartile values on all eStatement Studies data pages in the order indicated in the chart provided below. Why Use Medians/Quartiles Instead of the Average?

There are several reasons medians and quartiles are used instead of an average. Medians and quartiles eliminate the influence an outlier (or an extremely high or low value when compared to the rest of the values) would have. They also reflect more accurately the ranges of ratio values than a straight averaging method.

It is important to understand that the spread (range) between the upper and lower quartiles represents the middle 50% of all the companies in a sample. Therefore, ratio values greater than the upper quartile or less than the lower quartile may begin to approach unusual values.