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The Case of the Unidentified Industries

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The Case of the Unidentified Industries-2006 |
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In this case, a summary sheet which contains 14 sets of financial data from 14 different industries is provided. The task is to match 14 different firms with 14 industries by distinguishing the differences (e.g. sources of financing, profitability, the inventory turnover and the accounts receivable collection period) in the financial structures.

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1. Advertising agency: the matching industry is E. As a service firm, it does not contain inventory, so first of all, it can be narrowed down to E, G, M, and N.

And generally B to B firms provide credit terms to their customers which result in receivables collection periods(RCP) is larger than 30 days, therefore it can be further narrow to E,G,N. Furthermore, based on the given hint, the media purchase is made on behalf of the client, which means the account receivable and account payable should be roughly equal, since the agency does not pay for the media services until their client pays.

2. Airline: the matching industry is M. Similar to Ad agency, it is a service firm, so its inventory is zero as well (G, M, N), and moreover, it is also a Business to Customer firm, its RCP is relative short(less than 30 days), so only M (RCP=12) is left which matches the description.

3. Bookstore chain: the matching industry is B. Retail firms like bookstore chain are likely to have shorter RCP (less than 30 days), which means only A, B, H, I, K and M match this description. Furthermore, bookstore chain has relatively high plant and equipment (P&E), i.e. P&E / Assets is no less than 25%, thus A can be eliminated. Other than that, the inventory of book store is relatively high, therefore M (with no inventory), H and I can be eliminated as well. Moreover, the inventory turnover (cost of goods sold/inventory, indicates how often the company sells and replaces its inventory) of the book store chain is normally very low, because the books are neither…

Cite this The Case of the Unidentified Industries

The Case of the Unidentified Industries. (2016, Nov 16). Retrieved from https://graduateway.com/the-case-of-the-unidentified-industries/

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