Essay about The Case of the Unidentified Industries-2006
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.
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 …show more content…
7. Electric and gas utility (with 72% of its revenue from electricity sales and 28% of its revenue from natural gas sales): the matching industry is L. From the case, this company has 28% of its revenue from natural gas sales and electric utility would be no inventory. So that percentage of inventory must be very low and the percentage of plant and equipment should be huge. AGL Energy Limited is a good example in this industry. The receivable collection period due to the process of billing customers would be around 40 days. Due to the high cost of infrastructure, the profitability of this industry is 0.096 which is the second lowest of fourteen industries.
8. Family restaurant chain: the matching industry is H. Nandos is a good example for this industry. Because the profitability of a restaurant is highly depend on the location, equipment and taste, the percentage of plant and equipment would be most of the balance. And the quantity of customers would be huge; hence the inventory turnover would be very high. Due to the most customers pay by cash and credit cards