The best measure of company size is its value added (VA) because this reflects what the company does internally. VA is the sum of labor cost and capital cost including taxes. The ranking based on VA differs significantly from the Fortune 500 which uses revenue.
Based on VA, here is the Canback 50. Walmart tops the ranking, as it does in the Fortune 500, and Apple takes 2nd place (up from 3rd). Berkshire Hathaway is 3rd (up from 4th). ExxonMobil drops from 2nd to 29th.
Since VA usually is not publicly available, we approximate it as:
VA = capital cost + labor cost (= revenue – purchased goods)
Capital cost = EBITDA from annual reports
Labor cost = Labor cost of the main industry the company is participating in: the so-called NAICS classification. While not exact, it is roughly equivalent to the actual labor cost of the company.
In the graph below, the companies are ranked by VA in 2015. Note that the sum of the world’s companies’ and institutions’ VA equals global GDP.
There are major shifts in the ranking for the Canback 50 versus the Fortune 500. Technology and financial companies move up, while automotive and healthcare companies fall sharply.
We also calculated growth in VA over the past 5 years. Apple is the stellar performer. It makes up 4% of total US GDP growth.
The next graph compares the Canback 50 rank with the Fortune 500 rank. The correlation is only 0.6.
It would be interesting to make an international ranking as well, but such data is currently not available.
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Why revenue is a bad size metric: A-Co sells a pen to B-Co for one trillion and one dollars. B-Co immediately sells it back to A-Co for 1 trillion dollars. Suddenly A-Co is the largest company in the world by revenue. But VA is only one dollar.
Source: Company income statements, Bureau of Economic Analysis