The Financial Detective 2005

The Financial Detective 2005 Introduction each industry is distinctive. One might be unique in its higher(prenominal) flash-frozen assets other would be differentiated of its increasing intangible assets and many another(prenominal) other financial footprints that each industry leaves on its balance sheet. Nonetheless, industries argon distinguished elevatemore fingers of one hand are not the alike(p) as said. Businesses in the same industry can be characterized differently according to their strategic plan and capital structure. The following case highlighted close to characteristics of different industries and different rail linees within those industries.From pharmaceuticals to music and books, those differences, supported by numeric financial data, are explained in the following section. Books & Music General cultivation provided order 1 1. Selling through a vast retail-store charge 2. Traditional book retailing 3. Online presence and owns publishing imprint associa tion 2 1. Sells books, music, videos solely through the internet website 2. Three quarters of the gross sales are media 3. Sells electronics and other merchandise 4. deep became profitable 5.Followed a scheme of acquiring retailed online business recently Assessing the provided information about the two companies and facial expression deeply at almost of the financial data, it was concluded that smart set 1 is designated by the letter H and fraternity 2 is designated by the letter G in Exhibit 1 (see appendix 1). Investigating the financial data, it was found that Company 1 (H) had a higher inventories accountancy of 38. 6 this supports the position that it is a traditional book store that needed to slip away book inventories at all times to maintain its retail presence. This is further seen in its broth turnover, is has a land turnover of 2. 2x this reflects the nature of the keep friendship which traditional book retailer that experience slow turnover. Moreover, ac f amily 1 (H) has an 11. 1 in intangible assets, again this reflects the companies intangible assets such as publishing imprints. Also, company 1 (H) owns about 24. 4 in determined assets as a results of its vast retail network. For company 2 (G), inventory account is practically commence than company one (14. 8) this reflects the fact that company 2 is online based business that sells mostly digital products such as media along with few other general electronics and merchandise.Thus, its inventory turnover is much higher (13. 56x) correspondent to the nature of most of the sold product (digital media) that are highly demanded and easily accessible. Regarding its fixed assets account, company 2 (b) has lower fixed assets of 7. 6 this mainly reflects the activities tie in to electronics and other merchandise that probably requires some fixed assets, but for its E-commerce, it needs minimal- none fixed assets. Considering the type of this business (online based) it was noticed that its receivables account is very minimal compared to company 1.This is probably payable to the fact that online products are delivered upon payment, thus it is rare to purchase music on credit. Assessing some of the income statements components, depreciation is recognized to be low (1. 1) this is highly related to its low fixed assets. Last but not least, SG& A expenses of 16. 9 is lower than company 1 , this is logical because company 1 depends on a network of retailers that impose higher general and administrative expenses date company 2 depends solely on its o0nline channel. Finally, net profit of 8. 5 (which is higher than company 1) indicates the mentioned recent profitability.Newspapers Information provided Company 1 1. have-to doe with largely on one product 2. Fierce competition 3. Recently built a large office build for its headquarters. 4. international Company 2 1. Owns a number of local newspapers 2. Has a significant do of goodwill 3. Recent acquisitions 4. De centr alized decision making and administration victorious a closer look to the provided data, it was concluded that company 1 is designated by letter P and company 2 is designated by letter O (see Exhibit 1) this selection was based on a number of factors company 1 (P) have more receivables ( 9. ) than company 2 O, this is due to the fact that company 1 (P) operates on a larger, international scale than company 2, this larger customer base requires better and more receivable terms. Whereas company 2 , which operates on a smaller local level has lower receivables of 4. 6. Company 1 (P) has almost the double in fixed assets account t in company 2 (o) (34. 6, 14. 1) explaining the new purchase of the headquarter building by company (p). Assessing the intangibles account of both companies, it was noticed that company 2 (O) enjoys a high level of goodwill (76. ) while company 1 (P) has far less intangibles of 37. 1. Evaluating companys 1 (p) focused and centralized outline of producing and distributing one newspaper internationally, it was noted that this focus led to a decreased cost of goods sold (cost/ unit is inexpensive) this is evidenced in the lower COGS of 40. 5 compared to 49. 7 in company 2 (o). moreover, companys 1 (P) Debt/ asset ratio is higher than company 2 (O) ( 26. 81 compared to 15. 2) this indicated that it is more cost efficient for company 1 that operates internationally to pay its strategy implementation by using more debt than equity. This boosted the roe of company 1 to reach 20. 89 relative to a lower ROE of company 2 (9. 86) which follow a more conservative funding mix. As a final point, looking at the SG&A expenses, it was notice that company 1 (P) has higher admin expenses due to its strategy of operating internationally while company 2 enjoyed less Admin expenses due to its local strategy ( 39. 7 compared to 23 ).