Case study #1
Cash and short-term investment for Company A (24.2%) is higher than Company B (16.1%). Company A has higher receivables (12.8%) than Company B, 8.1%. This is probably because Company A distributes their products to institutions like hospitals, clinics and etc. Institutions take longer time to pay, while Company B distributes their diversified health-products to end-consumers or to the mass market by cash settlement or short credit term. Inventory turnover for Company A (3.08x) is higher than Company B (0.93x), that means inventories are sold and replaced faster than Company B. Company A has higher turnover because those institutions, especially hospitals “consume” health products faster and more. On the other hand, Company A has net fixed assets of 19.6%, higher than Company B (14.9%), which probably because Company A has more equipments to support their robust research and development. Intangibles e.g. goodwill for Company B (46.1%) is higher compared to Company A (22.2%). Because B focuses more on their brand development, company B (88.9%) has a higher gross profit margin most likely because the firm not only manufactures and mass markets a broad line of prescription pharmaceuticals, over-the-counter remedies, consumer health and beauty products but also manufactures medical diagnostics and devices. Company A is lower (76.1%) due to its limited product range (only manufactures drugs). In conclusion, Company A fits the descriptions of PFIZER. While Company B fits the second set of descriptions of. Johnson and Johnson.
From these ratios above we can conclude that Company D is healthier than Company C in the Beer Industry. Apart from the net profit margin, Company D is able to turn their assets into liquidity at a faster rate of 2.43x than Company C. The productivity in which they are able to utilize their resources to generate sales and profits is 11.67 higher than Company C. Company D has higher current ratio and quick ratio that is higher 2.43x and 2.3x respectively. This was because Company D had higher cash and short-term investment, which was 55.6% while Company C, only has 1.4%. It proves that Company D is financially conservative and it matches with the second described company. Beside that, Company D keeps more stock which is 11.9% compare with Company C 4.3% because their company produces seasonal and year round beers with smaller production volume and their beers’ demand is not whole year long. Hence slower sales in Company D will have lower inventory turnover with higher inventory. There was no dividend payout for Company D whereas the Company C they have high dividend payout ratio due to stable product sales that not affected by the seasonal event. The goodwill for Company C is higher than Company D of about 6.1%, this may be due to the Company C is a national brewer of mass market consumer beers sold under a variety of brand names, so the Company C can match with the first described company. The fixed asset turnover for Company C and Company D is 1.72x and 12.67x respectively. This is because Company C has many-fixed assets, and own a number of beer related business and several major theme park where the total fixed asset recorded 51.2% of its total assets. Company C has high total debt/total asset ratio and long-term debt / shareholders’ which were 51.19% and 310.28% respectively, while Company D has zero for both ratios. Company D has higher current ratio and quick ratio, which is higher 2.43x and 2.3x respectively. This was because Company D had higher cash and short-term investment, which was 55.6% while Company C, only has 1.4%. It proves that Company D is financially conservative and it matches with the second described company.
Both companies have a high beta, which makes them riskier in the market. Overall, Company F can turn their assets into liquidity faster than Company E and their...