Case 6 : The Financial Detective
Financial data is the most crucial information in describing any sort of business, but this information is also useful in differentiating between different types of businesses. In any specific industry, many key players are present, yet their strategies and implementations of business vary greatly. Two firms may achieve the same earned profit, yet go about securing this profit in radically different ways .A close analysis of financial data for each business can be used to understand and explain these different strategies employed by a given company and how that strategy affects the financial performance of each company. This case calls for the examination of two different companies within the same field and, through analysis of selected financial information, determining which set of data belongs to which company based on the different characteristics and strategies employed by each company. The results of this analysis are as follows. Health Products
The two companies listed here manufacture and market health care products. The first is the world’s largest prescription-pharmaceutical company containing a broad pipeline of ethical pharmaceuticals backed by significant research and development, which has recently divested many of its non-related business holdings and is considered the partner of choice in terms of licensing agreements. The second company is a diversified health-products company that manufactures and mass markets a broad line of pharmaceuticals, over-the-counter drugs, health and beauty products and medical devices. Brand development and management is key to this company. Company A is the more diversified company, while Company B is the world’s largest pharmaceutical company. A major signifier here is the intangible assets owned by Company B, 46.1 vs. 22.2, which would explain the patents and licensing deals mentioned in the company description, as well as the robust research and development budget. Another major clue here is in the inventory turnover. Company A, well-diversified with a mass-market strategy, turns over their inventory 3.8 times vs. .93 of company B, which is to be expected of a mass-market company intent of volume sales to consumers. Beer
Two brewers of beer are described here, the first being a national brewer of mass-market consumer beers sold under a variety of brand names who also owns a number of beer-related businesses and several major theme parks. The second is a smaller brewery with smaller production volume and higher prices that outsources most of its brewing activity. The firm is also mentioned to be financially conservative and has recently undergone major cost-saving initiatives. Company C is the national brewer while company D is the small market brewery. A major key here is understanding that company D is described as financially conservative, which helps explain the large amount of cash and short-term investments (55.6) that they keep on hand, while also holding no long-term debt. A large, national company like C would be expected to carry some debt in order to finance such large operations. Also, as C operates an extensive network of breweries and distributorships, while also owning beer-related businesses and theme parks, it would follow that their net fixed assets would be quite large (54.7) compared to the relatively smaller D (16). Computers
The two companies described here sell computers and related equipment. One company focuses exclusively on mail-order sales of built-to-order PCs and devices and is an assembler of PC components manufactured by suppliers. The other company sells a highly differentiable line of computers and accessories and has recently begun to recover from a dramatic decline in its market share. The firm has an aggressive retail strategy intended to drive traffic through its stores and expand its installed base of customers. Company E is the online retailer, while Company F is the retailer. As E is an...
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