Financial Detective 2005

Assignment: The Financial Detective, 2005 Case Analysis

Introduction / Objective

The Financial Detective, 2005 case (“Financial Detective”) introduces the idea that the financial characteristics amongst industries and amongst companies within each industry can differ. As stated in the introduction of Financial Detective, “the two most prominent drivers of financial characteristics are industry economics and firm strategy”.

It is important to note that because of the “unique economic features of each industry,” financial statements will vary from one industry to the next. The health products industry will display different financial characteristics than the hardware and tools industry.

Each industry will have specific set of financial characteristics that all firms operating in that industry will exhibit. However, firms within industries can have differing unique financial characteristics because the strategies that have employed are different. Different strategies can have different impacts on the financial results of each firm within the same industry.

The objective of this analysis is the match the financial data presented in Exhibit 1 with the company descriptions.

Industry: Health Products

Company A: Johnson & Johnson (NYSE: JNJ)

It is evident that Johnson & Johnson (“J&J) is Company A based on the variety of health products they provide and the financial characteristics. Cost of goods sold for J&J is higher than Pfizer’s because J&J produces a broad range of products that require different supplies and resources. J&J is committed to its mass-market-oriented strategy and thus has a higher inventory turnover ratio than Pfizer’s. J&J’s high balance of net fixed assets can be attributed to their manufacturing facilities and equipment needed to produce a wide variety of diversified health products.

The company was founded in 1886 and is based in New Brunswick, New Jersey.

Company B: Pfizer, Inc. (NYSE: PFE)

Pfizer, Inc....