Q: What is the parameter for entering into the club of fortune 500 companies?
Ans: Entering the club of fortune 500 for business if like an Oscar for an actor, highest civilian award (eg Bharat Ratna in India, The Presidential Medal of Freedom in USA) for an individual. But what is a fortune 500 company? Every year, iconic business magazine Fortune ranks American companies by their sales revenue as reported for the company’s previous fiscal year and then publishes that ranked list. The 500 top companies by that criterion become the Fortune 500, and the next 500 become part of a longer list known as the Fortune 1000. The criteria for a fortune 500 company is that it should be an American company as opposed to a company which is doing business in India. They can be any company but they should file financials statements with the government agency. Then the revenue reported by the companies is another consideration, and there are ground rules in place there as well. First, companies are ranked according to the revenues they’ve reported to their respective government agencies for their most recent fiscal year. Not all companies use the same fiscal year, so the comparison isn’t quite apples to apples, but it’s pretty close. If you’ve set yourself the goal of getting your company into the Fortune 500, it’s not as simple as hitting a high revenue target. Profit also plays a big part and whether that company can withstand stormy years? There is no fixed list where you can checkbox them and be sure to enter the club. The companies on the list get there by outperforming everyone else, and the amount of actual revenue needed to hit that goal is different every year. The longevity of a company also matters. Usually not always, Fortune 500 probably requires a decades-long window. Some companies on the list are about as old as the country itself, and longtime leaders such as DuPont and Colgate-Palmolive are starting their third century of operation. Even in the tech industry, longevity matters. Google has been around for over 20 years and Apple for 40, and the company now called IBM dates back to the 19th century. The other criteria amongst many others is vision-the big idea of the company. It can be more important than company’s numbers as well. Car maker Tesla is a prime example. It sits squarely in the middle of the 2018 list in the 260th position, despite having teetered on the edge of failure several times in its history. Sustained growth, client and employee retention also matters.
Walmart was the number 1 fortune 500 company in 2019 and each company in the list of 500 had reported a minimum 5.6 billion$ of revenue.
The other lists/barometers of US economy
- Within the United States, the two other most important lists are the Standard & Poor’s 500 and the Dow Jones Industrial Average. Both are important benchmarks for the American economy as a whole, but they’re not as broad as the Fortune 500 because they exclude private companies, focusing purely on publicly traded companies instead. The S&P index is made up of large, publicly traded companies from different sectors, having a good representation of the economy as a whole. They’re weighted by their total market capitalization, which is their stock price multiplied by their number of shares. The Dow is even more limited, consisting of just 30 stocks that are weighted by their stock price.
- It can be argued that the, Fortune 500, by focusing on revenues rather than stock price or market cap, is a better indicator of the health of the economy.
Other Popular Lists:
- 40 Under 40: A list of influential young leaders.
- 100 Best Companies To Work For: A list of U.S. companies that are deemed (using data from analytics firm Great Place to Work) to be the best (in terms of happiness and perks) for employees to work at.
- Global 500: A list of companies that generated the highest revenues worldwide.
- Most Powerful Women: A list of female individuals who are the most powerful (influential). There are four criteria: (1) size and importance of the woman’s business in the global economy, (2) the direction and health of the business, (3) the woman’s career, and (4) cultural and social influence.
- World’s 50 Great Leaders: A list of individuals who are transforming business, government, philanthropy, etc.
- World’s Most Admired Companies: A list of companies that are the most admired (through data gathered from over 3,750 executives, analysts, directors, and experts).