The Case of the Unidentified Industries-2006 Essay

1719 Words Dec 10th, 2012 7 Pages
| The Case of the Unidentified Industries-2006 | |

In this case, a summary sheet which contains 14 sets of financial data from 14 different industries is provided. The task is to match 14 different firms with 14 industries by distinguishing the differences (e.g. sources of financing, profitability, the inventory turnover and the accounts receivable collection period) in the financial structures.

1. Advertising agency: the matching industry is E. As a service firm, it does not contain inventory, so first of all, it can be narrowed down to E, G, M, and N. And generally B to B firms provide credit terms to their customers which result in receivables collection periods(RCP) is larger than 30 days, therefore it can be further
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4. Commercial bank: the matching industry is N. Similar to Advertising agency, it is a service firm, so its inventory is zero as well (only G and N are left which match the requirement), moreover, banks use a lot of “other peoples’ money” so that common total debt/total assets ratio is very high, i.e. N (total debt/total asset=0.88) fits this description.

5. Computer software developer: the matching industry is F. As a software developer, it focus on provide services. However, there will be few percentages in inventories like software CD-ROM. Hence, computer software developer would be C, D, F, H or L. Additional; Computer software developer focus on wholesale. Therefore, the inventory turnover ratio will be low, C, Hand L can be excluded. Because of the service type would be online; computer software developer will be low percentage of plant and equipment. So computer software developer must be F which has only 4% of balance. For instance, Microsoft is the biggest computer software developer. The current ratio in this industry is the highest which is 2.18. Moreover, net profit/ total assets is 0.181 which is greatest in the fourteen industries. Therefore computer software developer industry is the most profitability. The receivables collection period in this industry is 77 which is the fourth longest of the fourteen.

6. Department store chain with its “own brand”…

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