The Case of the Unidentified Industries
Alexander Farnell
260058399
19 September, 2012
Business Tools – PMBA
Response to
“The Case of the Unidentified Industries – 2006”
INTRODUCTION:
“The Case of the Unidentified Industries” challenges the reader to match 14 firms operating in 14 different industries with 14 sets of financial data from the year ending in 2005. This section aims to enlighten the reader about the methodology used to derive the responses shown in the subsequent section.
First, the industries are placed in one of the following groups: service industry, manufacturing, and retail. Several sub-groups are also created to better compartmentalize the problem (i.e. online retailer or food service).
Second, some basic financial information is deduced for each group (and/or sub-group). For example, we expect most of the service businesses to have zero inventories (excluding the food service industry). We expect online retailers, restaurants and grocery stores to have high inventory turnovers. We expect the accounts receivable collection period to be longer for wholesalers than for retailers. We expect the majority of retailers to have high sales volumes with small margins. We should also be able to predict, based on the state of the economy in 2005, which businesses should have been more profitable. All these financial trends are used to establish relationships between the financial data and the industry groups established earlier.
Third, the unique characteristics specific to each business are used to differentiate the businesses with similar balance sheets (i.e. low inventory turnover in a book store, high other assets for a pharmaceutical manufacturer, high profitability with low inventory for a software developer, long accounts receivable period for an H.M.O or advertising agency, etc…). This information should be sufficient for a preliminary matching of each business with a unique set of financial data.
Finally, wherever possible, a 2005 corporate financial statement
260058399
19 September, 2012
Business Tools – PMBA
Response to
“The Case of the Unidentified Industries – 2006”
INTRODUCTION:
“The Case of the Unidentified Industries” challenges the reader to match 14 firms operating in 14 different industries with 14 sets of financial data from the year ending in 2005. This section aims to enlighten the reader about the methodology used to derive the responses shown in the subsequent section.
First, the industries are placed in one of the following groups: service industry, manufacturing, and retail. Several sub-groups are also created to better compartmentalize the problem (i.e. online retailer or food service).
Second, some basic financial information is deduced for each group (and/or sub-group). For example, we expect most of the service businesses to have zero inventories (excluding the food service industry). We expect online retailers, restaurants and grocery stores to have high inventory turnovers. We expect the accounts receivable collection period to be longer for wholesalers than for retailers. We expect the majority of retailers to have high sales volumes with small margins. We should also be able to predict, based on the state of the economy in 2005, which businesses should have been more profitable. All these financial trends are used to establish relationships between the financial data and the industry groups established earlier.
Third, the unique characteristics specific to each business are used to differentiate the businesses with similar balance sheets (i.e. low inventory turnover in a book store, high other assets for a pharmaceutical manufacturer, high profitability with low inventory for a software developer, long accounts receivable period for an H.M.O or advertising agency, etc…). This information should be sufficient for a preliminary matching of each business with a unique set of financial data.
Finally, wherever possible, a 2005 corporate financial statement