The case of the unidentified industries – 2006
I tried to match the 14 firms operating in the 14 industries with the 14 sets of financial data presented in Exhibit 1.
To identify characteristics of 14 industries in financial data, I used ‘Yahoo! Finance’ homepage that enable us to obtain financial information such as balance sheet, income statement and cash flow of any firm by one click. First I focused Inventories. Because inventories should be used by manufacturers or retailers, the percentage of inventories is a valid clue to distinguish these industries from others. Otherwise there are four firms that have no inventory which means that they are service business. Among the 14 industries Advertising agency, Commercial bank, health maintenance organization, HMO should have zero inventory. Another firm would be Airline because it would not use the inventory for its products. Therefore E, G, M and N should be the four firms. Then I determined each firm from each characteristic. N has clearly different numbers from others in high accounts receivable and note payable. From balance sheets of commercial banks at net searching are specified by their high long term investments. It is a ground that N should be a commercial bank even though I could not find note payable in their financial data. M should be an airline company because its plant & equipment ratio is higher than other three companies. E is determined by its high other assets. Intangible assets, such as a franchise, a patent and goodwill, are included in them. In this case advertising agency has unique revenue from commissions that should be in intangible assets. The ratio of other assets agree with the almost half of total revenue that is characterized by the advertising agency. Therefore it is concluded that E is advertising agency. The rest of them, HMO should be G. It was determined by elimination among others but its high account receivable and account payable is...
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