Fortune 500

The “Fortune 500” refers to an annual list compiled and published by Fortune magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years. The list includes both public and private companies that publish their financial statements. It has been published every year since 1955, and it has long been a prominent yardstick for measuring the success and market impact of American businesses.

Historical Background

The Fortune 500 list was first compiled and published in 1955. Since its inception, it has been an important benchmark for business success and a definitive guide to the most prosperous American companies. Initially, the list included only companies in the manufacturing, mining, and energy industries. However, this changed in 1995, when Fortune magazine expanded the criteria to include service companies and companies in various other sectors.

Criteria for Inclusion

Companies are ranked based on their total revenues for their respective fiscal years. The revenue figures include a company’s consolidated subsidiaries, and the figures are reported according to generally accepted accounting principles (GAAP). The key criteria include:

• Total revenue for the fiscal year.
• Both public and private companies are eligible.
• Subsidiaries are included in the revenue count of the parent company.

Importance and Impact

The Fortune 500 list serves multiple roles in the business and economic landscapes:

• Benchmark of Success: It establishes a benchmark for comparing the size and revenue of different companies.
• Investor Reference: Investors often use the list to evaluate companies and decide on potential investment opportunities.
• Business Strategy: Company executives and business strategists use the list to analyze trends in various industries.
• Economic Indicator: It provides insights into the economic health and industry performance within the U.S. economy.

Notable Companies

The Fortune 500 list has featured some of the most influential and high-profile companies in the world. These companies often lead their respective industries in terms of revenue, innovation, and market impact. Some remarkable ones over the years have included:

• Walmart: Consistently at the top of the Fortune 500 list for several years, Walmart is a multinational retailer known for its massive revenue and wide-ranging influence in the retail sector. Walmart
• ExxonMobil: A leading oil and gas company, ExxMobil often ranks highly due to its extensive global operations and significant influence in the energy sector. ExxonMobil
• Apple: Known for its innovation in technology and electronics, Apple Inc. has been a mainstay near the top of the Fortune 500 list due to its substantial revenue from products like the iPhone. Apple
• Berkshire Hathaway: The holding company led by Warren Buffett, Berkshire Hathaway has a diverse range of subsidiaries and significant revenue, often placing it high on the list. Berkshire Hathaway

Sectoral Representation

The diversity of industries represented in the Fortune 500 list is a clear indicator of its comprehensiveness. Some primary sectors include:

• Technology: Companies like Apple, Microsoft, and Amazon consistently feature due to their substantial revenue from hardware, software, and services.
• Healthcare: Pharmaceutical giants such as Pfizer and Johnson & Johnson highlight the importance and profitability of the healthcare sector.
• Automotive: Automakers like General Motors and Ford continue to have a strong presence, reflecting the automotive industry’s scale.
• Energy: Energy companies, including Chevron and ExxonMobil, feature prominently due to their significant global operations and revenue.
• Finance: Financial institutions like JPMorgan Chase and Bank of America indicate the substantial revenue generated in the banking and financial sectors.

Methodology

Fortune’s methodology for ranking the 500 companies is meticulous:

1. Revenue Calculation: Total revenue includes gross sales, services, interest, dividends, and other income.
2. Subsidiaries: The revenue of consolidated subsidiaries is included.
3. Standardization: Financial data is adjusted to conform to GAAP, ensuring standardization and comparability.
4. Verification: The reported financial data undergoes extensive verification to ensure accuracy.

Changes and Trends Over Time

Since its inception, the Fortune 500 list has not only expanded in terms of the types of companies it includes but has also seen trends that mirror broader economic shifts. Over the years, technology companies have grown more prominent, reflecting the tech industry’s rise. Furthermore, globalization has led to the increasing presence of multinational companies and significant revenue streams from international operations.

In recent years, the list has seen shifts due to economic events such as financial crises, technological revolutions, and global pandemics. Companies new to the list often reflect emerging economic sectors like renewable energy, biotechnology, and e-commerce.

Criticisms and Controversies

While the Fortune 500 list is widely regarded, it has not been without criticisms:

• Revenue Focus: Critics argue that focusing solely on revenue ignores other important measures of a company’s health, such as profitability, innovation, and social impact.
• Transparency: Some suggest that the inclusion of private companies may lack transparency, as not all financial data may be publicly verified.
• Economic Impact: The list primarily reflects U.S. corporations, and thus may not fully capture the global economic landscape.

Future of the Fortune 500

Looking forward, the Fortune 500 list will likely continue to evolve:

• Inclusion of New Industries: As new industries emerge, such as those related to artificial intelligence and renewable energy, the list may see new entrants.
• Globalization: While the list mainly features U.S. companies, the increasingly global nature of business might influence future methodologies or inspire international equivalents.
• Technology and Innovation: Technology’s continuing surge will likely see tech companies maintaining or even increasing their presence.

Conclusion

The Fortune 500 list remains an influential and comprehensive ranking of American companies by revenue. It serves as a benchmark for business success, a tool for investors, and an economic indicator. With its rich history and evolving criteria, it continues to reflect the changing dynamics of the U.S. economy and the global business landscape.