Drivers of Industry Financial Structure
Drivers of Industry Financial Structure
A. Online Retailer:
- Low Net Plant & Equipment: An online retailer will not have a huge facility as compared to a manufacturer. It will have at most an office building and a warehouse to stockpile some inventory of its own.
- No Receivables/Days of Receivables: Since an online retailer caters to only individual customers, and since the latter pays usually by cash or credit card, accounts receivable will be at most a negligible amount, if not zero.
- Unearned Revenues: Unearned Revenues can exist for an online retailer especially when the company opens up pre-order accounts for various products which are not yet released in the market.
- Research & Development: An online retailer can have an R&D team which constantly works on improving the online storefront of the company by developing new or improving existing payment modes, storing sensitive information of customers securely, etc.
- Negative Net Income/Sales: This figure is negative because probably the company might have gone ahead and acquired some distressed companies during the turbulent years of 2000.
B. Supermarket Grocery Retailer:
- High Inventory: It’s normal for a supermarket retailer to stock up on inventory to its maximum possible limit given the fact that supermarket goods are fast moving consumer goods. Also due to high inventory, a retailer gets some breathing space in case a product (or many products) sells off quickly from shelves.
- High Net Plant & Equipment: This figure is quite high for a grocery retailer but there can be two explanations for this. Either this company has a chain of stores spread across a wide geographical area or the balance sheet of this company is very small and hence their net plant & equipment figure is coming out quite higher than what one would expect from a retailer.
- No Research & Development: Since this company sells goods and products from other manufacturers/producers, it will not have an R&D expense.
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A. Online Retailer:
- Low Net Plant & Equipment: An online retailer will not have a huge facility as compared to a manufacturer. It will have at most an office building and a warehouse to stockpile some inventory of its own.
- No Receivables/Days of Receivables: Since an online retailer caters to only individual customers, and since the latter pays usually by cash or credit card, accounts receivable will be at most a negligible amount, if not zero.
- Unearned Revenues: Unearned Revenues can exist for an online retailer especially when the company opens up pre-order accounts for various products which are not yet released in the market.
- Research & Development: An online retailer can have an R&D team which constantly works on improving the online storefront of the company by developing new or improving existing payment modes, storing sensitive information of customers securely, etc.
- Negative Net Income/Sales: This figure is negative because probably the company might have gone ahead and acquired some distressed companies during the turbulent years of 2000.
B. Supermarket Grocery Retailer:
- High Inventory: It’s normal for a supermarket retailer to stock up on inventory to its maximum possible limit given the fact that supermarket goods are fast moving consumer goods. Also due to high inventory, a retailer gets some breathing space in case a product (or many products) sells off quickly from shelves.
- High Net Plant & Equipment: This figure is quite high for a grocery retailer but there can be two explanations for this. Either this company has a chain of stores spread across a wide geographical area or the balance sheet of this company is very small and hence their net plant & equipment figure is coming out quite higher than what one would expect from a retailer.
- No Research & Development: Since this company sells goods and products from other manufacturers/producers, it will not have an R&D expense.
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