The Financial Detective

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This article explains that companies with certain industries tend to have similar financial make-ups. This is because companies within an industry face many of the same economic forces. Some of those economic forces would include government regulation, consumer sentiment towards the product or service, consumer demographics, and international appeal and competition. However, when you take a deeper look at the companies within the industry you will see differences in their financial statements because companies must tailor a competitive strategy to differentiate them from others within the industry. This article asks us match a description of two companies within the same industry with two sets of financial statement data.

Health Products. The world largest prescription-pharmaceuticals company (LPPC) is related to the B set of financial statements for several reasons. First, LPPC has cost of goods sold of 11.1% compared to the other companies cost of goods sold of 23.9%. LPPC has divested its non-pharmaceutical businesses which would be manufacturing in nature. On the other hand, the other company focus is on non-pharmaceutical sales, consumer health and beauty product, and medical devices which would lead to larger degree of manufacturing products and higher cost of goods sold. Second, LPPC is the partner of choice for licensing deals with other firms in the same industry. This would imply the higher level of Intangibles of 46.1% compared to the other company with 22.2%. Finally, LPPC is the largest firm in the world in this type of industry which would imply it is a very mature firm. Typically large, mature firms pay high level of dividends. This would explain the higher dividend payout ratio of 46.28% compared to the other companies of 38.21%.

Beer. The national brewer of mass-market consumer beer (NBCB) is shown by C set of financial statements and the other company is shown by D set of financial statements. First, NBCB operates an extensive network of...
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