The Case of the Unidentified Industries
19 September, 2012
Business Tools – PMBA
“The Case of the Unidentified Industries – 2006”
“The Case of the Unidentified Industries” challenges the reader to match 14 firms operating in 14 different industries with 14 sets of financial data from the year ending in 2005. This section aims to enlighten the reader about the methodology used to derive the responses shown in the subsequent section.
First, the industries are placed in one of the following groups: service industry, manufacturing, and retail. Several sub-groups are also created to better compartmentalize the problem (i.e. online retailer or food service).
Second, some basic financial information is deduced …show more content…
financial statements for the fiscal year ending June 30th, 2012.
G) H.M.O. (N/A)
It was known that G) belonged to the service industry because there was zero inventory. The only discernible difference between this set of financial data and that of E) Advertising Agency were the much higher asset turnover and lower profit margins for the former. This could be explained by the large amount of money involved in the medical industry coupled with the low profit margins typical of HMO’s. H) Family restaurant chain (Darden Restaurants Inc.)
The principal indicators that H) was in the food service industry were the low inventory with a high turnover rate, the high P&E, and the high asset turnover (indicative of large revenues). The data in Exhibit 1 is obtained from Darden Restaurants Inc. financial statements for the fiscal year ending May 28th, 2006. The low current and acid test ratios seem disturbing at first glance but the MD&A states that all revenues are generated as liquid cash and that short term financing is achieved through a commercial paper program supported by a Credit Agreement with a consortium of banks through which they can borrow up to $500 million.
I) Retail grocery chain (The Kroger Co.)
It was concluded that I) was a retailer because of the high inventory, large P&E, short AR collection period and the high asset turnover with small profit margins. What separated the retail grocery chain from the other