The Case of the Unidentified Industries Essay

1627 Words Jan 15th, 2013 7 Pages
Alexander Farnell
19 September, 2012
Business Tools – PMBA

Response to
“The Case of the Unidentified Industries – 2006”


“The Case of the Unidentified Industries” challenges the reader to match 14 firms operating in 14 different industries with 14 sets of financial data from the year ending in 2005. This section aims to enlighten the reader about the methodology used to derive the responses shown in the subsequent section.

First, the industries are placed in one of the following groups: service industry, manufacturing, and retail. Several sub-groups are also created to better compartmentalize the problem (i.e. online retailer or food service).

Second, some basic financial information is deduced
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The financial data presented in Exhibit 1 is from Dell’s fiscal year ending February 3rd, 2006.

D) Pharmaceutical Manufacturer (Pfeizer Inc. and Subsidiary Companies)
The best indicators that D) was a pharmaceutical manufacturer were the large amount of other assets (bought patents and goodwill), the low inventory turnover (indicative of a large batch process typical in the pharmaceutical industry), and a long AR collection period (typical of wholesale to retailers, governments, and H.M.O.’s). The financial data is confirmed as belonging to Pfeizer Inc. for the fiscal year ending in 2005.

E) Advertising Agency (Omnicom Group Inc. and Subsidiaries)
It was concluded that E) was in the service industry because there was zero inventory. The large amount of AR and other assets (i.e. acquired goodwill), as well as the very long AR collection period were highly indicative of a large advertising agency. The long AR collection period is probably best explained by the billing process, where expenses are invoiced throughout a prolonged advertisement campaign. The financial data in Exhibit 1 belongs to the Omnicom Group Inc.’s 2005 financial statements.

F) Software Developer (Microsoft Corporation)
It was surmised that F) belonged to the software industry because of the large amount of other assets (acquired copyrighted software), low inventory, low P&E as well as the very high profit margins and ROA. This high
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