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these two considerations.

Several important assumptions underlie the financial analyses of the radio industry presented in this section.  First, the report uses Standard & Poor’s Compustat database to obtain data on publicly-traded companies whose primary SIC code, or industry classification, was radio broadcasting (SIC 4832).16  In this way, publicly-traded companies whose revenues are generally derived from their non-radio holdings are excluded from the analysis.  Using this criterion, quarterly data are used to calculate financial ratios for 18 large, publicly-traded radio companies, which in total own some 1,937 radio stations and generate more than 63 percent of total reported radio industry revenues.17  Thus, most of the companies included in the analysis are larger station-group owners, and therefore may not reflect the performance of smaller owners (e.g., owners of two or fewer stations).  Comparable data for companies, which are not publicly traded and which would include many of the smaller radio companies, are not available through public data sources.  Section 5 of this report focuses on an analysis of small station groups and on radio stations located in small radio markets.

To give perspective to the calculated financial ratios, this report also calculates similar ratios for the S&P 500 companies.18  The median value of the calculated financial ratios for the publicly-traded radio companies are then compared to the median value of the same ratios for the S&P 500 companies.  The median is used, rather than the average, as a summary statistic, since financial ratios are rarely normally distributed and outliers (i.e., unusually high or low values) could distort the analysis.  The S&P 500 companies are used to create the benchmark financial ratios, since the S&P 500 is typically thought of as representing the broad “market” of U.S.

16 Standard & Poor’s produces an electronic database of financial information on over 20,000 public companies over more than 20 years.  SIC denotes Standard Industrial Classification.  This is a coding scheme for classifying firms according to industry as developed and maintained by the U.S. Department of Commerce.   Note that the data items obtained from the Compustat database are subject to revision, as Compustat updates its data.

17 The 18 companies are identified in Appendix E.  The number of owned stations and the percentage of radio industry revenues were calculated based on data in the BIA database, March 2000.  

( S&P chooses 500 of the largest publicly-traded companies which are intended to represent a broad index of common stocks covering most sectors of the U.S. economy.  The performance of the S&P 500 companies is a good measure of overall stock market performance.  It is similar to, but has a broader selection of companies than, the Dow Jones Industrial Average.


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