Drivers of Industry Financial Structure
A. Online Retailer:
- Low Net Plant & Equipment: An online retailer will not have a huge facility as compared to a manufacturer. It will have at most an office building and a warehouse to stockpile some inventory of its own.
- No Receivables/Days of Receivables: Since an online retailer caters to only individual customers, and since the latter pays usually by cash or credit card, accounts receivable will be at most a negligible amount, if not zero.
- Unearned Revenues: Unearned Revenues can exist for an online retailer especially when the company opens up pre-order accounts for various products which are not yet released in the market.
- Research & Development: An online retailer can have an …show more content…
- High Days of Receivables: Similar reason like that of the pharmaceuticals company.
H. Warehouse Club for Food and General Merchandise:
- High Inventory: Just like the Supermarket Grocery, a Warehouse Club also needs to have a high inventory for similar reasons.
- Low Days of Receivables: Similar to all retailers.
- No R&D: Sells products of different manufacturers. Hence no R&D expense incurred.
- Low Gross Margin: Gross margin is low because products are sold at a lesser price per unit.
- Net Income/Sales: This figure is higher than that of the Supermarket, because goods are sold in bulk by this company.
I. Temporary Staffing Agency:
- High Accounts Receivables: As a staffing agency earns its revenues through salary commissions (or 1 2 months of wages per employee provided), the bulk of its revenues are not immediately realized. Hence, this figure is high on the balance sheet.
- No Inventory: Obvious reason.
- No R&D: Again for obvious reasons.
- High Days of Receivables: For the reason outlined above, this