Fortune 500 (Company) – Definition

Cite this article as:"Fortune 500 (Company) – Definition," in The Business Professor, updated September 17, 2019, last accessed May 26, 2020, https://thebusinessprofessor.com/lesson/fortune-500-company-definition/.

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Fortune 500 Definition

The Fortune 500 enlists the best 500 US firms based on the total revenues earned for the specific fiscal year. The list is released in Fortune Magazine, and published on a yearly basis. It considers including both public and private firms in its assessment. And a firm that qualifies to be included in the list of Fortune 500 creates its own reputation worldwide.

Earlier, there was an ETF for keeping a track on the Fortune 500 firms. But today, there is no such way to trade stocks right away as an index on the list.

A Little More on What is a Fortune 500 Company

The Fortune 500 survey considers U.S.-based companies, who report their financial statements with public agencies, that are both publicly and privately held. Private firms that fail to file any financial statements with government organizations, foreign companies, or the organizations that don’t file financial statements for a minimum of three quarters of the present fiscal year.

Companies, by 2019, are given ranks on the basis of total revenues earned for their said fiscal years as mentioned on the 10-k filings.

Till date, over 1800 U.S. firms have made it to the Fortune 500 list. Since the first time the list was published in 1955, the list has gone through some dramatic changes. Companies have been excluded from the list because of falling prey to bankruptcies, acquisitions, mergers, etc. Recession can also result in excluding many companies from different industries. The Fortune 500 list indicates how strongly the economy is operating, or if the economy has recovered or improved after performing badly.

Key points to remember

  1. The Fortune 500 is issued by Fortune Magazine, and represents the biggest 500 U.S. firms positioned on the basis of total revenues for respective fiscal years.
  2. A company that manages to find a place in Fortune 500 enjoys a sense of reputation in the market, and are considered to be of top-notch quality.
  3. The first Fortune 500 list was published in the year 1955.

The History of Fortune 500

In the year 1955, the very first Fortune 500 list was issued. Edgar P. Smith, the assistant managing editor of Fortune Magazine, was the originator of this idea. And since then, big and reputed companies are making their way in this prestigious list.

The initial Fortune 500 list enlisted organizations belonging to the manufacturing, mining and energy industry, therefore, restricting big-shot names to be a part of the list. In the Fortune 500 list published in 1955, Green Motors ranked first with yearly revenues of $9.8 billion. For being eligible to be on the list, an organization needed to have an annual revenue of at least $49.7 million.

The Big Change in 1994

Fortune 500 encountered a huge change in the year 1994 when it also started considering service industry, besides manufacturing and mining and energy industries in its list.

This ultimate change made in 1994 had a huge impact on the Fortune 500 list. For instance, in that very year, there were 291 service companies enlisted out there of the 500 companies. Three service companies that recently entered the industry ranked in the top 10 listings in the Fortune 500. Walmart ranked at 4, AT&T at 5, and Sears Roebuck & Co. at 9, and had such changes not made to the list in 1994, Walmart would have managed to retain its number 1 position on the list.

Bragging Rights

In the year 2018, Walmart ranked first with a revenue of $500.3 billion, followed by ExxonMobil having a revenue of $244 billion, and Berkshire Hathaway with a revenue of $242 billion. General Motors secured 10th position producing annual revenues of $157.3 billion.

If there were a company that showcased magnificent improvement on the list was Tesla that improved its ranking from 260 to 123. Besides classifying organizations on the basis of ranks, the Fortune 500 list also awarded firms on the grounds of new entrants, the greatest employers, and the highest jumps. If you explore the official website of Fortune, you would be able to filter results on the basis of founders as CEOs, female CEOs, and many other factors.

(Note: Companies mentioned in the Fortune 500 list (2018) contributed to 2/3rd GDP of the U.S. economy. Their revenue count is of $12.8 trillion with $1 trillion profits, market share of $21.6 trillion, and employment of $28.2 million individuals on an international basis).

References for “Fortune 500”

fortune.com/fortune500/

https://en.wikipedia.org/wiki/Fortune_500

https://www.zyxware.com/articles/…/list-of-fortune-500-companies-and-their-websites

https://www.investopedia.com › Investing › Financial Analysis

https://searchcio.techtarget.com/definition/Fortune-500

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