Identifying the Industry Case
Financial Statement Analysis:
Identify the Industry Case
After researching balance sheets, income statements and financial ratios surrounding the industries in discussion, the below traits have been identified for each industry:
* High receivables and payables (loans)
* High Interest expensed
* Little inventory
* High net income
* High equity ratio
* Lots of inventory ...view middle of the document...
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 income & equity ratio. In addition, the day’s receivable ratio is very high for this company....
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