Identify Industry

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•  First, let us group the industries – several groups with broadly similar attributes : •  Financial Industry o  Commercial Banking

Identify  the  Industry

•  Retail Industry
o  Retail Grocery Store

•  High-technology industries
o  Computer Software o  Pharmaceutical Preparations o  Semiconductor Manufacturer

•  Service Industry
•  •  •  •  •  IT Service Provider Mobile phone service provider Commercial airline Integrated Oil and Gas Liquor producer and distributor

•  Capital Intensive Industries

Detailed  Financial   Characteristics  of  each  industry •  Financial Industry
High Receivables (Loans) High Payables (Deposits) Large ratio of assets to shareholders’ equity (du Pont leverage) Low Asset turnover ratio May have high G P Ratio (GP = Net Interest Margin = Interest revenue less interest income) o  Little inventory ???? o  o  o  o  o 

•  So 2 seems to be Commercial banking industry

Detailed  Financial   Characteristics  of  each  industry •  Retail Industry
o  Low GP Ratio o  Low Returns on Sales o  High Asset Turnover Ratio •  1, 4 & 5 o  Lots of inventory ???

•  So 1 seems to be Retail Grocery Industry

Detailed  Financial   Characteristics  of  each  industry •  High technology Industries – Software, pharmaceutical & semiconductor o  High R & D expenditure •  6, 7 & 8 o  High day’s inventory (high WIP) •  7 o  Between Software & semiconductor – high Fixed Assets (PPE)? •  Semiconductor •  6 o  So 8 is Computer Software

Detailed  Financial   Characteristics  of  each  industry •  Now 3, 4, 5, 9 & 10 remain unidentified •  Service industry – IT service provider & Mobile phone service provider o  Little Inventory •  5, 9 & 10 o  High current receivables •  5 & 10 o  So these seem to be the 2 service industry o  Who will have more receivables as proportion to assets ? •  IT service provider •  So 5 is IT service provider o  So 10 is Mobile phone service provider

Detailed  Financial   Characteristics  of...
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