Financial detective 2005 hardware and tools
Cash and short-term-equivalents percentage: Company G has more than half of its assets in cash and cash equivalents, which may reflect the firms readiness for implementing its acquisition strategy.
Newspapers: Company O is Lee and has a higher net profit margin because it is a fierce competitor with low threat. Company P has a significant amount of intangibles due to acquisitions.
It is up to you to match the financial data with the company descriptions. Detective Graham Waters, an African-American detective in the LAPD is disconnected from his mother, who suffers from a heroin addiction, and criminal younger brother.
Hardware and tools: companies K and L Company K is the Black and Decker Corporation, which manufactures and markets a broad range of power tools, primarily for consumer use. The company is known for its low prices, breadth of merchandise, and volume-oriented strategy.
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The company allows its customers to design, price, and purchase through its Web site. The other firm is a small producer of printing, writing, and technical specialty papers, as well as towel and tissue products. Company Gs percentage of net fixed assets is, therefore, significantly higher. The firm is financially conservative, and has recently undergone a major cost-savings initiative to counterbalance the recent surge in packaging and freight costs. In particular, one needs to understand the accounting policies that generated the statements. This may reflect the economies of scale that company C can achieve through its large size, relative to company D. Books and Music: Company G is Amazon based on its online presence description.
This case was prepared by Sean Carr, under the direction of Robert F. This company outsources most of its brewing activity.
This might reflect Es strategy as an assembler of components that have been manufactured by its suppliers. Company Es cost-of-goods-sold percentage is higher, reflecting its strategy of making money on volume rather than from individual product margins.
This illustrates not only company Is ability to negotiate lower volume-prices, but also the benefits of having its own forests and lumber operations versus company J, which purchases raw materials on the open market.
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Company F is Apple as it has a higher Beta than Dell due to its dramatic decline in market share making it more risky than the rest of the market. Company H is Barnes and Noble and because of their presence in retail stores, they have a higher net fixed assets and higher inventories because they must keep their stores and warehouses well stocked in order to meet customer demands. Because the company is centered largely on one product, it has strong central controls. Hardware and tools: companies K and L Company K is the Black and Decker Corporation, which manufactures and markets a broad range of power tools, primarily for consumer use. Similarly, companies within industries have different financial characteristics, in part, because of the diverse strategies that can be employed. Some Closing Points After surveying the industries and revealing the identities of the firms, a useful closing for the instructor is to summarize the determinants of the big differences between firms in the same industries: Consumer versus institutional health products Discount versus full price retail, computers Single high-profile versus diversified low-profile newspapers On-line versus bricks-and-mortar books and music Product mix Specialty versus full line retail, paper Mass market versus niche beer, tools Asset mix Asset intensity versus service intensity books and music Financial policy Debt versus equity paper, beer, tools Off-balance-sheet financing retail, beer Case 6 The Financial Detective, 59 It is important for students to observe that all those elements are based largely on decisions that managers make, as opposed to luck or the dictates of the environment. This flows through the income statement, leading to a lower net profit margin and a lower return on equity for company L versus company K. Easy Difficult Turning to the pairs of comparisons, we seek to impress upon the students the impact that different business strategies will have on the financial ratios of the companies. Their strategies and market niches provide clues as to the financial condition and performance that one would expect of them. Led by its charismatic founder, the company has begun to recover from a dramatic decline in its market share. Company E seeks to sell a relatively high volume of lower-margin products, while company F attempts to sell an adequate volume of higher margin products.
The company has spent the last few years rationalizing capacity by closing inefficient mills, implementing cost-containment initiatives, and selling nonessential assets. Their inventory turnover ratio is high as they are able to replenish inventory quickly due to having so many distribution centers.
Financial detective 2005 hardware and tools
Gross profit versus net profit: Company F has higher gross profit, consistent with the premium pricing of its highly differentiated product designs versus the commodity-product approach of company E. The firm also owns a number of beer-related businesses, such as snack and aluminum-container manufacturing, and several major theme parks. Company P has a significant amount of intangibles due to acquisitions. Their receivables are also higher which can be attributed to the financing it provides to its customers. A steel manufacturer would be expected to have a lower gross margin than a pharmaceutical manufacturer because commodities such as steel are subject to strong price competition, while highly differentiated products like patented drugs enjoy much more pricing freedom. Also, try to explain the differences in financial results across industries. At the end of class, the instructor can also make a number of observations about the art of ratio analysis. The other firm owns a number of newspapers in relatively small communities throughout the Midwest and the Southwest. The firm has only recently become profitable, and it has followed an aggressive strategy of acquiring related on-line businesses in recent years. A way to determine this would be to examine performance ratios such as subscriptions or advertising revenue per employee 58 Case 6 The Financial Detective, unfortunately, the case does not present these data. Inventories percentage: Company Hs proportion of inventories is significantly higher than company Gs, because company H must maintain stocks of books, CDs, and videos at all of its traditional stores, whereas company G can keep a more limited inventory at its distribution centers.
Company Gs percentage of net fixed assets is, therefore, significantly higher.
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