The Financial Detective
As rightly said in the case, the financial statements of no two companies are alike. The financial statements of companies in a particular industry, however, have many similarities and follow certain financial norms unique to that industry. Our analysis focuses on identifying these similarities.Company A: Manufactures and markets a broad line of name brand toiletries, nonprescription drugs, and consumer and baby care products. When compared to company B, it has:* A lower cost of goods sold figure, which indicates that it manufactures mass market consumer products.* Higher advertising expense, which indicates that the company targets its advertising towards a large consumer base (mass market).* Higher R&D expense, which indicates the company is rigorously improving its products and designing new ones to effectively compete in the mass market.Company B: Manufactures pharmaceuticals and a variety of low-margin hospital supplies. The firm recently acquired a large hospital supply company. When compared to company A, it has:* A higher long term (Other) assets figure, which indicates the significant amount of goodwill brought on to its books by the acquisition.
Company L: Is the largest food-service contractors in the country, a large chain of family and fast food restaurants. * A lower current liability figure, since land does not depreciate. * A higher accounts receivable figure which indicates that the company is operating in the retail sales channel where selling on credit is common. * A lower ratio of property, plant & equipment, which signifies the fact that much of the companies business comes from financial and software services which do not require a large investment in fixed assets. Company N: Owns one large flagship newspaper that is sold around the country and around the world. * A lower gross profit ratio, since it is in a more competitive business. * A lower gross profit sold figure, since it produces and sells a single brand. gher long term debt and lower cash reserves, which indicate the effects of the acquisition on the firm balance sheet. This firm is financially conservative. It had a contract to sell one brand solely as a private label item. When compared to company O, it has:* A higher receivables value, since much of its business is run on credit. When compared to company M, it has:* A large ration of Property, plant & Equipment, which accounts for its large production and distribution infrastructure. When compared to company H, it has:* A low ratio of accounts receivable, since it provides little or no credit to customers. When compared to company G, it has:* A lower equity since most of its assets are leased.
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Acceptance Essays
