The Financial Detective, 2005

Health Products

For the Health Products industry, there were several data figures that really stood out when Companies A and B were compared. We will show why Company B is the “world’s largest prescription pharmaceutical company” and why Company A is not. The figures used to support this claim are: Intangibles, Cost of Goods Sold, Inventories, and Inventory Turnover.

Since the first company mentioned is, “supported by a robust research and development budget,” one could conclude that its intangibles would be higher than the other company. With this in mind, Company B has more than double the amount of Intangibles that Company A has.

Another key differentiator is in the area of Cost of Goods Sold. Since the second company mentioned, “manufactures and mass markets a broad line of pharmaceutical products,” it can be concluded that their COG’s will be higher than that of a company that does more licensing of products. When looking at the numbers, Company A more than doubles Company B in the COGS category.

Next, given that the second company described has a mass market and production strategy their inventories would be more than a company that does not have the same focus. When comparing the Inventory Turnover, Company B’s is three times less than that of Company A because Company B has significantly more inventories and product lines. The items that Company B markets are more likely to be commodity based items for everyday use available to mass markets over the counter whereas Company A is marketing towards a specific consumer when developing and distributing its pharmaceuticals.

With the financial data and ratios provided, it can be concluded that Company B is the first company mentioned in the paragraph. This is confirmed by its high amount of Intangibles, low COGs (in comparison with Company A), and low Inventory Turnover.

Beer

The companies mentioned in the Beer industry have great variance between one another. One company is a...