Coping with Inherent Problems Associated with Utilizing Industry Norms

When students perform cross-sectional analysis, they must cope with several problems. These problems include: (a) determining a firm's Standard Industrial Classification code; (b) using ratios which are not typically presented in textbooks; and (c) using timely ratios with historical norms when a decision's success depends on future events. This paper discusses potential solutions to the inherent problems associated with utilizing norms in cross-sectional analysis. Also included is a review of the data presented in the publications which provide idustry norms.