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Unidentified Industries

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THE CASE OF THE UNIDENTIFIED INDUSTRIES
The analysis of the balance sheets and financial ratios enable us to match five different industries with respect to the corresponding financial structure reflected in the balance sheet.

The low collection periods make B or E either one of GM retail, or apparel. That leaves Automobile, Electric Utility and Automated Test Equipment / Systems at A,C or D.

Discounted general merchandise corresponds to B. The low collection periods make it one of B or E. However, the business cannot be negatively profitable. Hence it’s not E. The fast nature of the goods being sold at the retailer gives rise to quick inventory turnover. Thus matching industry is one of B. The low margin high volume gain that is common strategy in the industry gives rise to marginal profitability (1.5%) and a higher asset turnover ratio (3.25) resulting in economies of scale and rapid growth. This puts discounted general merchandise to most closely match to B. The investment in property and equipment is also second highest, owing to the investments in real estate and tools and equipment to manage the fast moving nature of the goods being sold. Additionally, this contributes to the lowest collection periods of 4 days, since the collection is upfront against the purchase of goods.

Upscale Apparel : The matching industry is E. Also, the industry faces stiff competition and companies need to innovate continuously to remain profitable. This snapshot from 2009 may be representative of the negative downturn in the economy in 2009 or because of the company failing to catch the new trend in the industry. Also the second lowest RCP(receivable collection period) of 43 days makes it the case for an upscale apparel industry where the continuous dynamism in the market demand has forced manufacturers to shorten design, development, production and distribution cycles.

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