The value of sampling
Donuts: Still inedible

Big Revenues or Big Profits?

Bigcompanies072805_1The chart on the right displays revenues and profits of the 10 largest companies in the world in 2004 (as ranked by revenues).  The graphic is yet another container of data: it elevates revenues, treating profits as a side thought. This table is clearer:

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The next two charts attempt to put revenues and profits on an equal footing.  I include the left chart to illustrate the folly of typical bar charts: the height of the bars serves no purpose except to distort our judgement of the lengths.  The right chart is preferred.

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Finally, the following statistical graphic brings out insights from the data. 

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  • The 10 companies fall into three groups: Giants (Exxon Mobil, Royal Dutch/Shell, BP, Walmart), Big and Mean (GE, Total, Toyota) and Big and Fat (Ford, DiamlerChrysler, GM).
  • Giants have revenues over $270 billion, among them the oil companies are more profitable than Walmart, even though it has the highest revenues.
  • Big and Fat consists of auto companies with big revenues but low profit margin.
  • The ranking and relative size of revenues can be read off the horizontal axis.  Similarly for profits on the vertical axis.  So both bivariate and univariate distributions are available on one chart.

This chart, a favorite of statisticians, is not without problems.  It is difficult to place the data labels without obstructing readability.  I placed the labels where they don't interfere with any reader tracing  dots to the axes, effectively in the northeast quadrant of each dot.  I omitted the country labels so as not to clutter the space.  I used color to further separate the dots from the labels.  I also sacrificed printing every data value for readability, assuming that the reader's interest in magnitude is not absolute.

Reference: "The World's Biggest Companies", Economist, July 28 2005.

 

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