Case of the Unidentified Industries
The table below presents the balance sheets (in percentage form) and other selected financial data for 11 firms drawn from 11 different industries. While there are clear differences in the financial structures of different firms within a single industry, the firms selected have figures which are broadly typical of those in their industry.
Try to match the following 11 firms operating in the 11 industries named below with the 11 sets of financial data presented in the table below:
To get you started you may assume that the department store (Dayton-Hudson), meat packer (IBP, Inc.), and retail drug chain (Walgreen) are D, I, and E respectively. What are the other 8 industries? One way to approach this is to identify outliers on different dimensions (inventory, inventory turnover, receivables collection period, inventory as % of total assets, plant and equipment as % of total assets, level of profitability, etc.) and use this information to narrow down the possibilities for each letter. For example the 47.x inventory turnover for a meat packer (I) makes sense (about once per week). A department store chain (D) probably has to borrow money to finance inventory and give credit terms to its customers. It there for would have a high debt.
A further approach is to group companies with common characteristics. For example which group of companies would have zero or very low inventory (Advertising agency, Airline, Commercial Bank, HMO Health maintenance organization)? The no inventory columns would be A, B, F, and H). Then you could ask, of these, what other differentiators might there be.
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Industries |
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A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
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Balance Sheet Percentages |
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Cash and marketable securities |
5 |
12 |
2 |
1 |
4 |
4 |
3 |
77 |
9 |
67 |
19 |
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Accounts Receivable |
85 |
55 |
4 |
15 |
7 |
6 |
4 |
7 |
28 |
9 |
13 |
|
Inventories |
0 |
0 |
1 |
24 |
43 |
0 |
22 |
0 |
13 |
2 |
12 |
|
Other current assets |
1 |
4 |
2 |
2 |
4 |
6 |
2 |
3 |
3 |
2 |
6 |
|
Plant and equipment (net) |
2 |
7 |
77 |
55 |
37 |
71 |
41 |
9 |
35 |
17 |
48 |
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Other assets |
7 |
23 |
15 |
3 |
5 |
13 |
29 |
4 |
13 |
2 |
1 |
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Total assets |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
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Notes Payable |
62 |
3 |
0 |
2 |
0 |
4 |
2 |
0 |
0 |
0 |
7 |
|
Accounts Payable |
18 |
63 |
3 |
17 |
18 |
5 |
13 |
32 |
15 |
6 |
5 |
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Accrued taxes |
2 |
2 |
0 |
1 |
1 |
0 |
1 |
3 |
6 |
6 |
2 |
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Other current liabilities |
0 |
0 |
4 |
9 |
17 |
17 |
12 |
2 |
13 |
5 |
8 |
|
Long-term debt |
7 |
6 |
29 |
38 |
0 |
40 |
29 |
0 |
19 |
0 |
15 |
|
Other liabilities |
4 |
8 |
21 |
5 |
10 |
17 |
14 |
1 |
6 |
0 |
1 |
|
Preferred stock |
2 |
0 |
5 |
3 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
Capital stock and capital surplus |
2 |
10 |
11 |
1 |
3 |
12 |
5 |
11 |
24 |
28 |
16 |
|
Retained earnings |
4 |
7 |
28 |
23 |
51 |
5 |
24 |
51 |
18 |
55 |
46 |
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Total liabilities and stockholder equity |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
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Selected Financial Data |
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Current assets/current liabilities |
1.11 |
1.03 |
1.31 |
1.46 |
1.59 |
0.63 |
1.10 |
2.35 |
1.58 |
4.72 |
2.31 |
|
Cash, marketable securities and receivable/current assets |
1.10 |
0.97 |
0.98 |
1.40 |
1.49 |
0.40 |
1.04 |
2.28 |
1.50 |
4.59 |
2.03 |
|
Inventory Turnover |
NA |
NA |
16.7 |
5.6 |
5.2 |
NA |
8.6 |
NA |
47.6 |
7.5 |
2.0 |
|
Receivables collection period (days) |
3,728 |
381 |
30 |
31 |
8 |
27 |
6 |
13 |
16 |
37 |
74 |
|
Total debt/total assets |
0.69 |
0.10 |
0.29 |
0.40 |
0.00 |
0.44 |
0.31 |
0.00 |
0.19 |
0.00 |
0.22 |
|
Long-term debt/capitalization |
0.09 |
0.24 |
0.40 |
0.57 |
0.00 |
0.66 |
0.48 |
0.00 |
0.32 |
0.00 |
0.18 |
|
Net sales/total assets |
0.095 |
0.523 |
0.464 |
1.822 |
3.175 |
0.828 |
2.610 |
2.032 |
6.473 |
0.867 |
0.643 |
|
Net profit/net sales |
0.141 |
0.047 |
0.115 |
0.020 |
0.031 |
0.014 |
0.019 |
0.131 |
0.015 |
0.247 |
0.106 |
|
Net profit/total assets |
0.013 |
0.025 |
0.053 |
0.037 |
0.097 |
0.012 |
0.049 |
0.267 |
0.098 |
0.214 |
0.068 |
|
Total assets/net worth |
14.10 |
5.84 |
2.31 |
3.61 |
1.85 |
5.77 |
3.43 |
1.62 |
2.39 |
1.21 |
1.61 |
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Net profit/net worth |
0.189 |
0.144 |
0.123 |
0.134 |
0.179 |
0.067 |
0.168 |
0.432 |
0.234 |
0.258 |
0.110 |