What it means
Rankings of the largest companies are a long-standing feature of business journalism. The Forbes 500 adds to these by weighing several measures rather than relying on revenue alone, which means a company with modest sales but a very high market value can rank well.
The four ingredients usually described are revenue, profit, assets and market value. Revenue shows scale of activity, profit shows how much of it is retained, assets show the resources the business controls, and market value shows what investors think the company is worth.
Combining these gives a broader view of corporate size than any single figure. The list matters to businesses as a reputation marker and as a market reference.
Suppliers, lenders and recruits may regard membership as a sign of stability, and analysts use the list as a starting point for peer comparisons. A company moving up or down the ranking can be a prompt for news coverage and shareholder questions.
There are some caveats. Rankings change each year because company results and share prices move, so membership is not permanent.
The list also covers only public companies, which leaves out large private firms, and its coverage and methods have changed over time. Readers sometimes confuse it with the Fortune 500, which ranks the largest US companies by revenue alone and is a separate publication.
The two lists overlap heavily at the top but are not the same, so it pays to check which one is being quoted. Because the list is published periodically, a company's position reflects a snapshot of results at the time of compilation.
A strong year can lift a company several places, and a weak one can drop it off the list entirely.
In practice
Real-world examples.
Example
A credit analyst at a regional bank reviews a customer who is on the Forbes 500 list. She treats this as supporting evidence of scale but still examines the customer's cash flow and debt before setting a credit limit.
Example
A sales director at a software company builds a target account list from Forbes 500 members in the retail sector. Her team prioritises those with a high market value, since they are more likely to have large technology budgets.
Example
A manufacturer's investor relations team notes that the company has risen from rank 410 to rank 365. It mentions the move in the annual shareholder letter, together with the revenue and profit growth behind it. Each of these uses treats the list as a prompt for questions rather than as an answer.
Case study
Seen in the real world.
Summit Ridge Foods is a fictional packaged food company that had hovered just outside a major large-company ranking for several years. The chief financial officer was asked by the board whether a planned acquisition would lift the company into it. The acquisition would add revenue and assets but also debt.
She modelled four measures separately. Revenue would rise 18%, assets would rise 22%, profit would rise 6%, and the expected market value would depend on how investors reacted to the extra debt.
In this illustrative scenario, the model suggested that the company would climb only if investors approved of the deal. She advised the board to judge the acquisition on its return on investment and not on the ranking, and the board agreed. Any move on the list would be treated as a by-product rather than a goal. The deal was later judged on its cash returns over three years, and the ranking was mentioned only in passing in the annual report. The board also recorded that a ranking built partly on market value can move simply because share prices change, even when the underlying business has not changed at all.
Watch out
Common mistakes.
- Confusing the Forbes 500 with the Fortune 500, which is a separate list ranked by revenue.
- Assuming that being on the list means a company is financially healthy, when size and strength are different things.
- Using an old ranking as if it were current, when the list is refreshed regularly and membership changes.
Questions
People also ask.
What does the Forbes 500 measure?
It measures corporate size using a combination of revenue, profit, assets and market value. Each ingredient captures a different view of size, so a company can rank well on one and poorly on another.
Does the list include private companies?
No. It covers publicly traded companies, so large private firms are not included.
Should a company aim to be on it?
Treating the ranking as a goal can distort decisions, such as buying revenue at low margins just to climb. It is better regarded as a result of good performance than as a target, and boards should judge strategy on returns to shareholders.
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