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Identifying the Industry Case

In: Business and Management

Submitted By swordz55
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Financial Statement Analysis:
Identify the Industry Case

Team 6

Industry Traits
After researching balance sheets, income statements and financial ratios surrounding the industries in discussion, the below traits have been identified for each industry:
Financial industry * High receivables and payables (loans) * High Interest expensed * Little inventory * High net income * High equity ratio
Retail industry * Lots of inventory (especially Finished goods) * Low gross profit percentage * Low debt due to risky business
High technology * High Research and Development * High gross profit * High liability
Service industry * Little inventory * High shareholder equity * High receivables * High gross profit * High net income * No r & d
Capital intensive * Liquor industry may have high inventories * Airline industry may be more capital intensive * Low liability * Low equity * Low net income

Categorizing the Companies
Company 1 - Retail Industry (Grocery) (right answer)
This company appears to be associated with the retail industry. Compared to the other companies, Company 1 has (1) the lowest gross profit and gross margin; (2) fairly high inventory; (3) no R&D; (4) moderate property, plant & equipment costs; and (5) high finished goods. Historically, grocery stores are a low margin industry and since they do not “create” a product to sell they do not invest money into R&D and rely on selling finished products produced by others.
Company 2 - Commercial Banking (right answer)
This company appears to be associated with the financial industry. Compared to the other companies, Company 2 has (1) low inventory; (2) the highest receivables, payables, & gross profit; (3) no R&D; (4) no raw materials, work in progress or finished goods and (5) high net...

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