How Is the Fortune 500 List Determined?


Quick Answer

The Fortune 500 list is determined by sorting public companies in the United States by their sales, earnings, assets and capitalization. The list only determines the rankings of public companies or companies that have issued publicly traded securities as part of their offerings.

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Full Answer

The first factor that is used in the ranking of Fortune 500 companies is growth in sales. Sales growth is used to gauge both the company's growth as well as the state of the economy. Generally, a period of healthy economic activity corresponds with a similar growth in a company's sales. When a company's sales growth is better than the state of the economy, it can indicate superior product quality or low-cost production.

The rankings of the Fortune 500 companies are also determined by how much assets and earnings they have. A company's assets are the cumulative sum of any economically valuable items in its possession. These include things such as cash, securities, inventory, office equipment and property. A company's earnings are calculated by subtracting any costs, such as operational expenses and taxes, from the revenue that was earned. A company's earnings figure is also generally considered to be the most important factor in influencing its stock price.

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