5.4 Longitudinal vs. Cross-sectional Analysis (Example)
Definitions:
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- Longitudinal:
- Different times
- Over time
- Same company
- Different times
- Longitudinal:
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- Cross-sectional:
- Same time
- Different companies
- Company-to-company
- Cross-sectional:
In all instances the ratios presented will be the same.
Exercise: Describe the longitudinal and cross-sectional relationships for the profitability ratios in the table below.
Description:
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- Both ABC and XYZ Corporations are more profitable now than then.
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- XYZ is more profitable both now and then than ABC.
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Financial Ratios Do Not Provide Answers
| Col. Jessup (Jack Nicholson): | You want answers? |
| Lt. Kaffee (Tom Cruise): | I think I’m entitled to… |
| Jessup: | You want answers? |
| Kaffee: | I want the truth! |
| Jessup: | You can’t handle the truth! |
-A Few Good Men (1992)