THE CASE OF THE UNIDENTIFIED INDUSTRIES
West Coast Finance
In the Case of the Unknown Industries, we matched several industries with their corresponding balance sheets. We used several different methods to come up with our conclusion. An important factor we had to remember was the economic state industries were in their respective year.
A. Online Retailer
This set of data belongs to the online retailer industry. The most significant categories that helped with our decision was the low inventory for a retail business and the relatively high inventory turnover. The reasoning behind the high inventory turnover was because the goods were allowed to sit in storage until sold because of the online aspect of the business. We were also able to research the balance sheet from a well-known online retailer business in Amazon.com, and noticed similarities. Some similarities are the high amount of cash, and high long-term debt. We concluded that the high long-term debt is high due to the company trying to expand.
B. Bookstore Chain
B represents the bookstore chain. They carry large amount of inventories as the books are their main assets. Even though this industry is a retail business, their inventory turnover is low compared to other retail industries. It is because these days, consumers tend to read books and other paper materials online. As a result, they sell less and replenish their stocks less.
C. Online direct factory to customer PC vendor
We determined that online direct factory to customer personal computer vendor represented C. Using Exhibit 1 the two key figures that gave us this indication was the high inventory turnover ratio, above average accounts receivable. As an online business normally inventories move fast due to the item being shipped as soon as it has been sold. In using dell computers as an example we saw a similar high turnover ratio. As being a supplier for business as well as personal computers the account receivable figure would also match this industry as business make various purchases on accounts payable.
D. Pharmaceutical Manufacturer
We determined that D stands for pharmaceutical manufacturer. We came to this conclusion as this industry has the highest other assets figure seen in exhibit 1. In manufacturing pharmaceuticals it is often a very expensive process which ultimately produces valuable assets in intellectual property and patents. These assets are intangible and hence in financials put as other assets.
E. Parcel Delivery Service
We chose Parcel Delivery Service for the letter E based on the having an above average plant equipment and zero inventory turnover. As a parcel delivery service company there would not be an inventory ratio as parcel companies do not have any inventory as they are a delivery service. We came to this conclusion using UPS as an example as they to contain an n/a on inventory turnover as well as an above average plant equipment figure.
F. Computer Software Developer
Computer software developer reflects F. Companies in this industry tend to have low inventories as this is more of a service industry. Besides, their EBITDA/revenue ratio which is a profitability measure, is the second highest among the 14 industries as this is a high-tech industry.
G. Social Media Network
Social media network is matched with G. We came to this conclusion with the analysis of Exhibit 1. Social media networks are typically financed through investment banks. The investment banks are given stocks in exchange for capital to fund social media networks. Therefore, the common stock under G is rather large compared to the rest of the industries. Also, they do not have any inventory because they do not sell a product for consumers to consume.
H. Restaurant Chain
This set of data belongs to the restaurant chain industry. The data in this industry shows very high inventory turnover because of the perishable nature if their products such as meats, fruits, and...
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