Financial Statistics for Large Chemical Companies – Part 2

In my last blog I presented a table with a few financial statistics for many large global chemical companies. Click here to read that blog.

In this follow-up blog, I present some correlations between those statistics in the previous blog. Correlations were computed using Excel’s CORREL function. I focused on those correlations between statistics that management might affect and the results of those effects on targeted financial improvements.

An increase in sales correlates with an increase in long-term debt (81% correlation) but long-term debt as a percentage of sales goes down (-10% correlation) as sales goes up.

An increase in long-term debt is correlated with a greater gross profit margin percentage (11% correlation).

Companies with higher sales show a greater gross profit margin percentage (2% correlation).

Also correlated with higher gross profit margin percentage is increased research & development expense (13%).

Net income as a percentage of sales correlates with an increase in gross profit margin percentage (31% correlation).

However, greater net income increase as percentage of sales does not correlate with greater research & development expense (-33% correlation) or long-term debt (-29%).

The following table shows those correlations between statistics (sales, long term debt, cost of sales, and research & development expense) that management might affect and the results of those effects on potentially targeted financial improvements:

 

sales	gpm%	2%
sales	net inc % sales	-33%
sales	r&d exp % sales	3%
sales	lt debt % sales	-10%
lt debt	gpm%	11%
lt debt	r&d exp % sales	8%
lt debt	lt debt % sales	44%
lt debt	net inc % sales	-29%
cos	gpm%	-12%
cos	r&d exp % sales	-1%
cos	lt debt % sales	-12%
cos	net inc % sales	-35%
r&d exp	gpm%	13%
r&d exp	r&d exp % sales	54%
r&d exp	lt debt % sales	-3%
r&d exp	net inc % sales	-33%

Such correlations, as the above, might be helpful in predicting company decisions on targeted financial measurements.