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Identifying Industries Using Common-Size Balance Sheets

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Identifying Industries Using Common-Size Balance Sheets
The table below presents common-size balance sheets for five firms. The firms are:
1. Commonwealth Edison: Generates and sells electricity to businesses and households.
2. Hewlett-Packard: Develops, assembles, and sells computer hardware and printers. The firm outsources many of its computer and printer components.
3. Household International: Lends money to consumers for periods ranging from several months to several years.
4. May Department Stores: Operates department store chains and offers its own credit card.
5. Newmont Mining: Mines for gold and other minerals, utilizing heavy equipment.
Use whatever clues that you can to match the companies listed above with the firms listed in the exhibit.

1. Commonwealth Edison as stated generates and sells electricity of businesses and households. I would link this company with the second balance sheet and I have several clues that support this: first the level of inventories is very low, 2.0 % of total assets, which is usual for a company with this type of operations. Second, the level of PPE is very high, 74, 3 % of total assets, which includes all the heavily equipment used to generate and distribute electricity. The long term debt is high, 47, 7 % of total assets, which can be explained with the huge long term investments that need to be done in this industry.
2. Hewlett-Packard or HP can be linked with the fifth balance sheet and I base this conclusion on several clues. First it has a level of inventory, 23, and 6 % of total assets, which can be linked with this type of company. This number could be even higher because manufacturing companies have material inventory, work in process inventory and finish goods inventory but as stated HP outsources many of its components. A second clue is the PPE, a relatively high number which represents

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