The Financial Detective, 1996

Background information:

The objective of this case is to analyze the common-sized financial data and ratios of 8 pairs of companies in different industries. By analyzing numbers in financial statements, we hope to have better image about their industry economics and firm strategies.

Analysis:

 Health products

1. Company A has higher receivables and higher inventories, so it might not distribute its products through a direct sales force, instead it might sell its products to retailers and distributors.

2. Company B has minority interests items in its income statement, so it may owns shares in joint ventures.

As a result, Company A manufactures nonprescription drugs sold to retailer, while Company B distributes prescription drugs to doctors and hospitals.

 Household Appliances

1. Company D has higher receivables and lower receivable turnover, that means it might sell its products through a retailers rather than sell under its brand name.

Therefore, Company D is the one has private-label appliances on contract with retailer and Company C's strategy is to be the quality leader and charges higher price.

 Computers

1. Company F has lower gross profit, because it keeps costs low and charges low prices.

2. Company F has lower inventories and higher receivable turnover, because it's a mail-order seller, thus normally it gets paid quickly (or immediately) then customize the orders.

Hence, Company F is the mail-order seller and Company E sells through dealers targeting on business market.

 Retailing

1. Company G has high receivables which is more than 60% of total assets, so it might sells largely on credit.

2. Company H has lower gross profit and high asset turnover, which is 2.3 times of Company G's asset turnover, we might indicate that the strategy of Company H is to sell underpriced to enhance market share and sales volume.

Thus, Company G is the large, national chain of department stores, and Company H is the home-improvement store chain....