Drivers of Industry Financial Structure
Executive summary
Ratios of ten companies are presented in this study. The companies are all headquartered in the United States and the financial statements are the most recent annual financials for the respective fiscal years ending in 1999 or 2000.
The companies are:
1. Developer of prepackaged software
2. On-line retailer
3. Warehouse club for food and general merchandise
4. Major passenger airline
5. International hotel chain
6. Temporary staffing agency
7. Supermarket grocery retailer
8. Pharmaceutical company
9. Manufacturer of electronic communications equipment
10. Manufacturer and marketer of consumer products
Analysis
1. Innovation is extremely important in the software industry and it requires investments. The gross margin is very high: 90.7%. Office buildings and computers are the services needed. High R&D/Sales: 19.8%. The Net Plant & Equipment is low: 8.6%
2. Receivables are unimportant for an online retailer. No R&D since the company sells goods and products from others and it has zero R&D expense.
3. Warehouse Club for food and general merchandise has high Net Plant & Equipment 44.8% and zero Unearned Revenue. The Inventory is high 41.6% comparing with a supermarket grocery retailer.
4. Major passenger airline has some Accounts Payable 13.0%, high Unearned Revenue as a result of prepaid ticket purchases for future air travel 11.0%.
5. International hotel chain has high Goodwill: 25.1%
6. Temporary staffing agency has a relatively low percent of Net Plant. The temporary workers are the main resource of a staffing agency. Because it is a service industry, there is no Inventory and R&D is not necessary so they are 0. A high Asset Turnover: 4.130.
7. Supermarket grocery retailer is similar with warehouse club for food and general merchandise but the supermarket gross margin in higher 26.5% and net profit margin is lower. High inventory 21.9% and high Net Plant &Equipment 46.1%.
8. Pharmaceutical company has
Ratios of ten companies are presented in this study. The companies are all headquartered in the United States and the financial statements are the most recent annual financials for the respective fiscal years ending in 1999 or 2000.
The companies are:
1. Developer of prepackaged software
2. On-line retailer
3. Warehouse club for food and general merchandise
4. Major passenger airline
5. International hotel chain
6. Temporary staffing agency
7. Supermarket grocery retailer
8. Pharmaceutical company
9. Manufacturer of electronic communications equipment
10. Manufacturer and marketer of consumer products
Analysis
1. Innovation is extremely important in the software industry and it requires investments. The gross margin is very high: 90.7%. Office buildings and computers are the services needed. High R&D/Sales: 19.8%. The Net Plant & Equipment is low: 8.6%
2. Receivables are unimportant for an online retailer. No R&D since the company sells goods and products from others and it has zero R&D expense.
3. Warehouse Club for food and general merchandise has high Net Plant & Equipment 44.8% and zero Unearned Revenue. The Inventory is high 41.6% comparing with a supermarket grocery retailer.
4. Major passenger airline has some Accounts Payable 13.0%, high Unearned Revenue as a result of prepaid ticket purchases for future air travel 11.0%.
5. International hotel chain has high Goodwill: 25.1%
6. Temporary staffing agency has a relatively low percent of Net Plant. The temporary workers are the main resource of a staffing agency. Because it is a service industry, there is no Inventory and R&D is not necessary so they are 0. A high Asset Turnover: 4.130.
7. Supermarket grocery retailer is similar with warehouse club for food and general merchandise but the supermarket gross margin in higher 26.5% and net profit margin is lower. High inventory 21.9% and high Net Plant &Equipment 46.1%.
8. Pharmaceutical company has
References: Higgins, Robert C. (2012) Analysis for Financial Management, 10th edited by The McGraw-Hill Companies, Inc