Synopsis and Objectives
The case presents the student with financial ratios for eight pairs of unidentified companies and asks them to mate the description of the company with the financial profile derived from the ratios. The primary objective of this case is to introduce students to financial ratio analysis—in particular, the range of ratios and the insights each one affords. This case presumes that students have already been introduced to the definitions of various financial ratios through other readings or lectures.
The structured exploration of pairs of companies within an industry affords a number of important insights into strategy and financial performance. First, the economics of individual industries account for significant variations in financial ratios because of differences in technologies, product characteristics, or competitive structures. Second, financial performance results from managerial choices: within industries, the wide variation in financial ratios is often a result of the differences in corporate strategy in marketing, operations, and finance. For those reasons, this case is a good springboard into subsequent classes, which deal with the interaction of strategy and financial performance.
Suggestion for Advance Assignment to Students
The problem in this case is self-explanatory so no formal assignment questions are required. Depending on the level of the students, however, the instructor may choose to assign different subgroups of the class to deal with specific industries. In addition, the students may benefit from suggested textbook readings that define and discuss the various financial ratios. There are no supporting computer spreadsheets associated with this case.
Hypothetical Teaching Plan
Discussion leadership of this case can be fairly straightforward. One could simply proceed through the eight industries. There are, however, several teaching tactics that