The Financial Detective 2005

The financial Detective 2005 Introduction Each assiduity is distinctive. One might be unique in its high frozen(p) additions former(a) would be identify of its increasing impalpable assets and many other financial footprints that each industry leaves on its balance sheet. N nonpareilthe slight, industries are distinguished furthermore fingers of one lot are not the same as said. Businesses in the same industry can be characterized differently according to their strategic plan and big(p) structure. The chase case highlighted many characteristics of different industries and different bloodes within those industries.From pharmaceuticals to symphony and books, those differences, supported by numerical financial data, are explained in the following section. Books & Music General information provided Company 1 1. interchange with a extensive retail-store presence 2. Traditional book retail 3. Online presence and owns publishing imprint Company 2 1. Sells books, music, vi deos solely through the internet website 2. Three quarters of the sales are media 3. Sells electronics and other switch 4. novelly became profitable 5.Followed a strategy of acquiring retailed online business latterly Assessing the provided information about the two companies and looking deeply at some of the financial data, it was concluded that union 1 is designated by the letter H and smart set 2 is designated by the letter G in bear witness 1 (see appendix 1). Investigating the financial data, it was found that Company 1 (H) had a higher inventories account of 38. 6 this supports the fact that it is a traditionalistic book store that needed to keep book inventories at whole times to maintain its retail presence. This is further seen in its inventory turnover, is has a light turnover of 2. 2x this reflects the genius of the political party which traditional book retail merchant that experience slow turnover. Moreover, attach to 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 fixed assets as a results of its vast retail net. For company 2 (G), inventory account is much lower 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 think to electronics and other merchandise that probably requires some fixed assets, but for its E-commerce, it ineluctably minimal- none fixed assets. Considering the type of this business (online based) it was noticed that its receivables account is genuinely minimal compared to co mpany 1.This is probably due to the fact that online products are delivered upon payment, thence it is rare to purchase music on credit. Assessing some of the income statements components, depreciation is accept to be low (1. 1) this is highly related to its low fixed assets. dwell 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 small-arm 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. Centered largely on one product 2. Fierce competition 3. Recently built a large office building for its headquarters. 4. international Company 2 1. Owns a number of local newspapers 2. Has a significant amount of goodwill 3. Recent acquisitions 4. Decentralized decision making and administration Taking a ne arer 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 cream was based on a number of factors company 1 (P) generate 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 client 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 strategy of producing and distributing one newspaper internationally, it was noted t hat this focus led to a decreased constitute 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 finance its strategy carrying into action by using more debt than equity. This boosted the ROE of company 1 to stretchability 20. 89 relative to a lower ROE of company 2 (9. 86) which follow a more conservative financing mix. As a final point, looking at the SG&A expenses, it was observed 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 ).