Case 6: Week 2 Discussion Solved No Plagiarism.

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Case 6 – The Financial Detective, 2016

This case presents financial ratios for eight pairs of unidentified companies and asks you to mate the description of the company with the financial profile derived from the ratios. The primary objective of this case is to introduce you to financial ratio analysis — in particular, the range of ratios and the insights each one affords. This case builds upon knowledge you acquired previously in other business finance courses with respect to the definitions and usage of various financial ratios.

The structured exploration of pairs of companies within an industry affords a number of important insights into strategy and financial performance. First, the economics of individual industries account for significant variations in financial ratios because of differences in technologies, product characteristics, or competitive structures. Second, financial performance results from managerial choices: within industries, the wide variation in financial ratios is often a result of the differences in corporate strategy in marketing, operations, and finance.

You do not need to report on all 16 companies. Post your company pair selection in the Discussion Forum to claim it. Do not select the same company pair as another student – this is a “first come, first served” opportunity. Company pair “O and P” is not available. Review the first post in the Discussion Forum for an example of what your research should contain. Companies O and P are an example of what you should do.

Although you do not have to research all companies, you must still review and comment upon the research of your classmates.

Please post directly to the discussion board; do not only upload an attachment.
You may include supplementary attachments if they help support or illustrate your position.

The attached spreadsheet may also be helpful to you.

Description

Case 6 – The Financial Detective, 2016

This case presents financial ratios for eight pairs of unidentified companies and asks you to mate the description of the company with the financial profile derived from the ratios. The primary objective of this case is to introduce you to financial ratio analysis — in particular, the range of ratios and the insights each one affords. This case builds upon knowledge you acquired previously in other business finance courses with respect to the definitions and usage of various financial ratios.

The structured exploration of pairs of companies within an industry affords a number of important insights into strategy and financial performance. First, the economics of individual industries account for significant variations in financial ratios because of differences in technologies, product characteristics, or competitive structures. Second, financial performance results from managerial choices: within industries, the wide variation in financial ratios is often a result of the differences in corporate strategy in marketing, operations, and finance.

You do not need to report on all 16 companies. Post your company pair selection in the Discussion Forum to claim it. Do not select the same company pair as another student – this is a “first come, first served” opportunity. Company pair “O and P” is not available. Review the first post in the Discussion Forum for an example of what your research should contain. Companies O and P are an example of what you should do.

Although you do not have to research all companies, you must still review and comment upon the research of your classmates.

Please post directly to the discussion board; do not only upload an attachment.
You may include supplementary attachments if they help support or illustrate your position.

The attached spreadsheet may also be helpful to you.

THE FINANCIAL DETECTIVE, 2016
Common-Sized Financial Data and Ratios
                                 
  Airlines Beer Computers Hospitality Newspapers Pharmaceuticals Power Retail
A B C D E F G H I J K L M N O P
ASSETS (%)                                
Cash & ST Investments 6 10 5 15 14 41 7 2 25 35 1 13 5 25 30 8
Receivables 4 2 3 9 10 18 4 18 9 14 5 11 7 8 10 3
Inventory 1 1 2 9 1 16 0 0 0 2 3 10 2 7 16 25
Current Assets—Other 5 4 3 3 5 9 4 3 2 4 2 2 5 6 0 4
Current Assets—Total 17 16 14 35 31 84 15 23 36 56 11 35 19 46 56 39
Net Property, Plant, & Equipment 42 75 14 64 8 4 53 17 25 23 3 23 62 19 33 49
Long-Term Marketable Securities 0 1 0 0 56 0 0 0 13 0 0 10 0 0 0 0
Goodwill & Intangibles 28 1 70 1 3 2 9 39 5 19 85 26 8 3 7 6
Assets—Other 13 8 2 1 2 9 23 21 21 2 1 6 12 33 4 7
Assets—Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
LIABILITIES & EQUITY (%)                                
Accounts Payable 5 2 9 7 12 4 2 10 4 6 1 4 5 5 31 17
Debt in Current Liabilities 3 5 4 0 4 0 4 5 8 0 2 0 7 1 5 0
Current Liabilities—Other 24 19 8 11 12 20 8 38 12 12 8 19 7 8 15 20
Current Liabilities—Total 33 26 21 17 28 24 15 53 23 18 11 23 19 13 52 38
Long-Term Debt 13 16 32 0 18 0 14 63 10 0 62 22 50 4 13 36
Deferred Taxes 0 14 9 9 8 0 1 0 0 0 12 0 3 0 2 0
Liabilities—Other 34 6 4 3 4 5 18 43 32 28 3 13 12 7 14 15
Liabilities—Total 80 63 66 29 59 29 47 159 66 46 88 59 83 24 80 89
Stockholders’ Equity 20 37 34 71 41 71 53 (59) 34 54 12 41 17 76 20 11
Total Liabilities & Equity 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
                                 
INCOME/EXPENSES (%)                                
Revenue 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Cost of Goods Sold (70) (60) (39) (48) (60) (69) (63) (26) (39) (101) (23) (24) (81) (74) (67) (63)
Finance Div. Operating Exp. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (1)
Interest Expense – Finance Division 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (0)
Gross Profit 30 40 61 52 40 31 37 74 61 (1) 77 76 19 26 33 36
SG&A Expense (4) (4) (32) (36) (6) (12) (12) (23) 45 0 (26) (33) (1) (7) (19) (28)
R & D Exp. 0 0 0 0 (3) (13) 0 0 0 0 (3) (24) 0 (4) (12) 0
Depreciation & Amort. (5) (5) 0 0 0 0 (13) (4) 4 5 0 0 0 0 0 0
Other Operating Expense (5) (12) 3 0 0 0 0 0 0 0 (23) 0 0 (0) (0) 0
Earnings before Interest and Taxes 16 19 32 16 30 6 13 47 12 (5) 25 19 18 14 2 8
Net Interest Expense (1) (2) (4) 0 1 0 (2) (5) (2) 0 (15) (0) (6) 0 (0) (1)
Other 3 0 1 (0) (0) 0 (3) 2 (4) (2) (12) (4) (4) 0 (0) (0)
Pretax Income 18 17 29 16 31 6 8 44 6 (7) (1) 14 8 15 1 7
Income Tax Expense (6) (7) (6) (6) (8) (2) (3) (14) (2) 1 (1) (2) (3) 0 (1) (3)
Earnings of Discontinued Ops. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Extraord. Item & Account. Change 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Minority Int. in Earnings 0 0 (4) 0 0 0 0 0 0 0 (0) 0 (3) 0 0 0
Net Income 11 11 19 10 23 4 5 30 4 (7) (3) 12 2 15 1 4
                                 
MARKET DATA                                
Beta 1.20 1.10 0.95 0.95 0.95 1.20 1.15 1.15 1.15 0.95 1.15 0.75 1.15 1.50 1.05 1.00
Price/Earnings 10.0 10.9 24.2 34.0 12.8 22.0 59.8 24.0 34.9 nmf 18.3 22.9 27.2 9.7 nmf 19.2
Price to Book 3.9 2.4 4.2 3.9 5.0 2.8 0.3 nmf 2.7 0.8 5.5 6.1 1.8 1.2 25.5 6.4
Dividend Payout (%) 7.9 0.0 88.2 0.0 21.8 0.0 0.0 29.5 41.8 (39.4) 0.0 88.7 91.5 0.0 0.0 197.5
LIQUIDITY                                
Current Ratio 0.52 0.60 0.64 2.01 1.11 3.50 1.02 0.43 1.53 3.17 1.04 1.53 0.99 3.48 1.08 1.04
Quick Ratio 0.31 0.44 0.41 1.35 0.90 2.45 0.72 0.37 1.45 2.82 0.62 1.03 0.63 2.49 0.77 0.30
ASSET MANAGEMENT                                
Inventory Turnover 37.0 85.4 5.9 8.5 62.8 3.9 109.7 nmf nmf 61.2 2.3 1.6 17.6 4.6 7.7 4.9
Receivables Turnover 16.5 43.3 13.0 25.3 13.6 5.3 8.8 13.1 7.1 8.3 4.3 5.9 5.8 9.3 17.8 11.7
Fixed Assets Turnover 1.9 1.0 2.2 2.4 10.8 22.0 0.6 14.1 2.4 4.8 7.6 2.5 0.6 2.5 5.5 4.1
DEBT MANAGEMENT                                
Total Debt/Total Assets (%) 79.6 62.9 66.0 28.5 58.9 29.1 47.4 159.0 65.7 45.7 87.7 59.0 83.0 24.2 79.5 88.7
LT Debt/Shareholders’ Equity (%) 62.4 43.5 95.2 0.1 44.8 0.0 26.2 nmf 29.3 0.0 501.9 54.6 292.5 5.2 61.5 320.9
Interest Coverage 13.6 10.0 6.5 nmf 97.2 nmf 4.8 8.1 4.2 nmf 1.7 23.2 1.9 74.1 4.9 10.2
DuPONT ANALYSIS                                
Net Profit Margin (%) 11.1 10.6 19.0 10.3 22.8 3.8 4.9 30.1 4.0 (6.6) (2.8) 12.1 2.0 15.3 0.6 4.2
Asset Turnover 0.8 0.8 0.3 1.5 0.9 1.1 0.3 2.4 0.6 1.0 0.3 0.6 0.4 0.5 1.8 1.7
Return on Equity (%) 46.0 23.6 19.7 21.9 46.2 5.8 2.9 nmf 8.1 (14.8) (5.0) 16.1 11.2 10.4 4.9 36.2
                                 
nmf = not a meaningful figure
Data source: S&P Research Insight, Capital IQ, and Value Line Investment Survey.

 

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