Identifying Industries Using Common-Size Balance Sheets

602 Words Jan 17th, 2015 3 Pages
Identifying Industries Using Common-Size Balance Sheets
The table below presents common-size balance sheets for five firms. The firms are:
1. Commonwealth Edison: Generates and sells electricity to businesses and households.
2. Hewlett-Packard: Develops, assembles, and sells computer hardware and printers. The firm outsources many of its computer and printer components.
3. Household International: Lends money to consumers for periods ranging from several months to several years.
4. May Department Stores: Operates department store chains and offers its own credit card.
5. Newmont Mining: Mines for gold and other minerals, utilizing heavy equipment.
Use whatever clues that you can to match the companies listed above with the
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3. Household International is a financial institution and I would link this company with the first balance sheet. First clue is that they have no inventory which is the case with financial institutions. Second, the receivables are the largest part of the total assets, 81, 9%, and the total debt is much higher than the equity, 88, 8 % of total liability and shareholders’ equity. The last clues are that this company has the lowest PPE form all five listed here.
4. May Department Stores is a merchandising company and I would link it with balance sheet number four. First clue are the inventories, 23, 2 % of total assets, usual for this type of company. As stated above, the offer their own credit cards, which can be explained the level of account receivables, 25, 7 % of total assets. Compared to the other five companies, May Departments Stores have an amount of PPE (20 % of total assets) that suits best for this type of company. The current liabilities are relatively high, 38, 3 % of total liabilities and shareholders’ equity, usual for merchandising company and a low level of long term debt, 9, 3 %.
5. Newmont Mining Company can be linked with balance sheet number three. First clues is the number for PPE, 62, 6 % of total assets, which represents all the heavily machinery for mine excavation. The level of inventory suits best for this company when we take into