How should we compare our financial ratios with industry averages?
Compare financial ratios with similar industries and company sizes over several years. Use the Bank of Korea’s 2024 analysis to choose peers and investigate signals that individual ratios can obscure.
How should financial ratios be compared?
Financial ratios become meaningful when compared with averages for companies in the same industry and size group, rather than all businesses combined. The Bank of Korea publishes industry- and size-specific financial ratios annually, making them useful benchmarks. Look at trends over several years rather than a single year's gap. When a ratio differs from the average, first distinguish a problem from a difference in the business model. Use the comparison to generate questions rather than rankings.
Where can we find industry-average financial ratios?
The Bank of Korea has compiled annual Financial Statement Analysis statistics for for-profit corporations since first publishing statistics for 1960 and 1961 in 1962. In 2011, it switched from a sample survey to aggregation of the entire population, using financial statements attached to corporate income-tax returns submitted to the National Tax Service. The 2024 results covered 961,336 nonfinancial for-profit corporations.
Industries follow the eleventh revision of Statistics Korea's Korean Standard Industrial Classification. Companies with several businesses are assigned to the industry accounting for their largest share of sales. Size categories distinguish large, middle-standing and small and medium-sized enterprises; from 2024, SMEs are further divided into small and medium enterprises. This allows a comparison with the category closest to your company. Detailed tables by industry and size appear in the statistical section of the publication. Results generally become available near the end of the following year, so allow for roughly a one-year lag when comparing current performance. Calculate your company's ratios using the same formulas.
How different were the ratios for large enterprises and SMEs?
In the Bank of Korea's 2024 Financial Statement Analysis, the sales growth rate for all for-profit corporations was 3.7%, the operating profit margin was 4.6%, and the liabilities-to-equity ratio was 119.9%. Ratios varied substantially by company size even in the same year.
Key financial ratios by size in 2024: Bank of Korea Financial Statement Analysis
| Indicator | Large enterprises | SMEs |
|---|---|---|
| Sales growth rate | 3.4% | 4.1% |
| Operating profit margin | 5.6% | 3.0% |
| Pretax profit margin | 5.5% | 2.4% |
| Liabilities-to-equity ratio | 101.5% | 162.7% |
| Borrowings-to-total-assets ratio | 25.4% | 41.1% |
In the same statistics, the 2023 sales growth rate for all for-profit corporations was -1.5% and the operating profit margin was 3.5%. With substantial changes over a single year, one year's figures alone are insufficient to judge your company's position. SMEs' liabilities-to-equity ratio declined from 166.9% in 2023 to 162.7% in 2024, but remained far above that of large enterprises.
An SME owner using the all-industry operating margin of 4.6% as a benchmark may make the company appear further behind than it really is. Using the overall liabilities-to-equity ratio of 119.9% may understate the comparative borrowing burden. This is why figures from the same size group should be used.
How should we choose the comparison group?
The Enforcement Decree of the Framework Act on Small and Medium Enterprises defines the size criteria. An SME must meet the average-sales criteria for its main industry in Appendix 1, have total assets below KRW 500 billion, and satisfy ownership and management independence requirements. Among SMEs, a company meeting the main-industry average-sales criteria in Appendix 3 is classified as small; the remainder are medium enterprises. Sales thresholds differ by industry, so check the criteria for your company's principal industry directly.
The Bank of Korea classifies companies as large enterprises if they belong to a business group subject to disclosure or qualify as middle-standing enterprises, even when assets and sales alone would qualify them as SMEs. Check your company's category against these criteria and align its industry with the business generating its largest share of sales. Differences in conditions remain even after matching size and industry. The reason for explaining industry, size, timing and market conditions when comparing companies is the same as in using other companies' success stories.
What misleading impressions can an individual ratio create?
Checks to accompany major financial ratios
| Ratio | What it shows | What to check even if it looks favorable |
|---|---|---|
| Sales growth rate | Speed of growth | Whether the increase comes from higher prices or higher sales volumes |
| Operating profit margin | Profitability of core operations | Temporary cost deferrals or one-off factors |
| Liabilities-to-equity ratio | Liabilities relative to equity | The nature of non-borrowing liabilities and the maturity profile |
| Borrowings-to-total-assets ratio | Borrowings as a share of assets | The share of short-term borrowings and interest-rate terms |
| Total asset growth rate | Changes in asset size | Whether additional assets generate sales |
Both the numerator and denominator of a ratio can move. An increase in the operating margin caused by falling sales and an even larger fall in costs may signal a warning for growth. It helps to break operating profitability down into price and cost effects. Examine several ratios together to see whether they tell a consistent story. Also check whether the financial statements used are consolidated or separate and whether accounting standards have changed.
What should we examine first when a ratio differs from the average?
A difference from the average is not automatically a problem. Different business models, such as asset-heavy manufacturing or distribution requiring substantial inventory, produce different ratios. First chart three to five years of trends to see whether the gap is growing or shrinking. If it is growing, trace the difference back to the accounts responsible. Reading the figures with operational staff can reveal causes that are not visible in the books alone. Industry averages also combine many firms and may vary substantially over one or two years, so read them as trends too. Checking the aggregation method and population before interpreting statistics follows the same principle discussed in customer survey sample size.
How should financial analysis inform management decisions?
Financial ratios signal where a problem may lie; its causes must be sought in customers, markets, organization and operations. Putting changes in ratios on the quarterly management agenda allows causes to be discussed before problems grow. The Korea Research Institute of Business & Branding analyzes the relationships among organization, people, finance and operations, and has strengthened research into corporate financial stability and business restructuring since 2009. See corporate competitiveness analysis for its approach and business research methods for the underlying research perspective.
Frequently asked questions about financial-ratio comparisons
Where can we download the Bank of Korea statistics?
Industry- and size-specific ratios are available in the Bank of Korea's Financial Statement Analysis publication and Economic Statistics System. Download earlier years as well as the latest release to compare trends.
Can sole proprietors compare themselves with these statistics?
Financial Statement Analysis covers for-profit corporations filing corporate income-tax returns. Sole proprietors should allow for the differences and use the statistics as directional reference information.
Is a liabilities-to-equity ratio above the industry average dangerous?
Consider the nature and maturity of liabilities together with the operating profit available to cover interest. For borrowing to finance growth, whether investment translates into sales is central. Dividing operating profit by interest expense also helps assess interest-paying capacity.
How often should comparisons be made?
Industry statistics are released annually, so annual comparison is the starting point. Compare internal monthly and quarterly ratios with the corresponding periods of the previous year. Keep the calculation formulas consistent once established.
References
- Bank of Korea, 2024 Financial Statement Analysis Results (Commentary and Statistical Tables), December 2025. https://www.bok.or.kr/portal/bbs/P0000599/view.do?nttId=10094232&menuNo=200455
- National Law Information Center, Enforcement Decree of the Framework Act on Small and Medium Enterprises, Articles 3 and 8, effective January 2, 2026. https://www.law.go.kr/법령/중소기업기본법시행령