Drivers of Industry Financial Structure Essay

642 Words3 Pages
Executive summary

Ratios of ten companies are presented in this study. The companies are all headquartered in the United States and the financial statements are the most recent annual financials for the respective fiscal years ending in 1999 or 2000.
The companies are:
1. Developer of prepackaged software
2. On-line retailer
3. Warehouse club for food and general merchandise
4. Major passenger airline
5. International hotel chain
6. Temporary staffing agency
7. Supermarket grocery retailer
8. Pharmaceutical company
9. Manufacturer of electronic communications equipment
10. Manufacturer and marketer of consumer products

Analysis

1. Innovation is extremely important in the software industry and it
…show more content…
A common use of the Gross Margin is to estimate a company’s breakeven sales volume.(Higgins,2012)
9. Manufacturer of electronic communications equipment has the lower Profit Margin and longer Accounts Receivable characteristic of a firm effectively bidding for government contracts.
10. Manufacturer and marketer of consumer products have a small size of Inventory 10.4% and its Net Plant & Equipment is 39.3%. The Unearned Revenues is zero and R&D/Sales is also 0.

Conclusions
 Service Industries:
Temporary staffing agency, hotel and airline: balance sheets are C, D & I.
I is the temporary staffing agency
D is expected to be the airline
C remains as the hotel
 R&D Based Firms:
Software, On-Line Retailing, Pharmaceutical and Communication Equipment. Financial statement candidates would be A, F, G & J.
J is the software firm
A is clearly the on-line retailer since it is losing.
G is the communication equipment firm because it has the lower Profit Margin and higher Accounts Receivable.
F remains the pharmaceutical firm because it has higher Margins due to the capacity to keep high drug prices. It also spends a significant amount on R&D while the competition is always coming up with a new product.
 Consumer or Retail Based:
Warehouse Club, Supermarket and Consumer Products firm. Remaining financial statements are B, E & H.
B & H have low Accounts Receivable, Margins and high Inventory turnover so must be the warehouse club and the
Get Access