THE FINANCIAL DETECTIVE

Djeri Oktafyan Wowiling

NIM: 29319162
 ANALYSIS ON HEALTH PRODUCT COMPANIES
Company A
Company A is the manufacturer of a
broad line of name-brand toiletries,
non-prescription drugs and consumer
and baby-care products primarily
because of a larger market, which
comprises of 165 decentralized
subsidiaries; there is a presence of a
higher gross margin which accounts for
63.1% of the total revenue.
Company B
Company B is the manufacturer of
pharmaceuticals and a variety of low-
margin hospital supplies which were
marketed primarily through direct sales
to doctors and hospitals because of the
presence of a lower gross margin of
36.0%. In addition, its “other assets”
comprise a large percentage of its total
assets (40.6%) , which can attributed to
the goodwill stemming from acquiring a
large hospital supply company.
 RECOMMENDATION ON HEALTH PRODUCT COMPANIES
Company A
Company A should continue to
penetrate its market in order to sustain
the margin percentage. However, cost-
benefit considerations should also be
considered such that if maintaining its
market would entail more cost and will
provide less benefits, it would be
advisable to reduce the number of its
subsidiaries.
Company B
Company B should expand its market.
It can be achieved by having
advertising projects aimed to mass
market their products in an effort to
attract more consumers and generate
larger revenue.
 ANALYSIS ON APPLIANCES COMPANIES

Company C Company D

Company C is the marketer of high Company D is the marketer of the

quality washers, dryers, dishwashers same products, but under 3 different
and refrigerators under its own name, brand names. The presence of a higher
primarily because of a presence of cost of goods sold (79.3%) infer that
lower cost of goods sold (72.8%) which manufacturing and selling under
infers that manufacturing and selling different brand names would require
under one brand name entails a lower higher cost.
cost. In addition, its sales to assets
ratio is much higher (223.0%) which
says that they are much concentrated
in utilizing their assets to generate
more sales.
 RECOMMENDATION ON APPLIANCES COMPANIES
Company C
Company C should maintain its
strategy to operate under a single
brand name. In addition, if the
company’s sales to assets ratio can still
be improved, much better.
Company D
Company D, since selling under 3
different brand names entail more cost,
they should make an effort to reduce
brand names. However, qualitative
factors should also be considered such
as the market demand for that
particular brand, its impact on
consumers and its contribution to the
company’s total income.
 ANALYSIS ON COMPUTERS COMPANIES

Company E Company F

Company E is the manufacturer of Company F is the manufacturer of

large mainframe computers which also supercomputer systems for scientific
provides financial and insurance applications. Its output may be small,
services. Receivables comprise 18.7 but its price tag is the highest in the
percent of total assets which is industry, which is why they have a
significant in financing type of lower cost of goods sold (35.7%) due to
business. In addition, when a company a small number of units produced, but a
offers financial services, it generates higher gross margin (64.3%) because of
other income in the form of interest, higher selling prices. In addition, since
which can be seen in their income the computers were used for physical
statement (2.7%). research, the company incurs research
and development expense (15.8%).
 RECOMMENDATION ON COMPUTERS COMPANIES

Company E Company F

Company E, which also engages in Company F should provide a balance

financial and insurance services, of all sorts. A company may have a
should take a closer look and larger margin but with its high selling
emphasize on credit management; that prices, it would not be attractive on the
is, efficient management of consumers’ point of view. The company
receivables, credit granting, and taking should expand on its production and
precautions with regards to maintain reasonable level of R & D
uncollectible accounts. In addition, it costs.
should generate larger income in the
form of interest.
 ANALYSIS ON RETAILING COMPANIES
Company G
Company G is the firm that operates
discount department store and
wholesale clubs. Its inventory is large
(51.7%) which is typical for a
wholesaler. In addition, the presence of
a nominal amount of receivable in its
assets (1.9%), a very quick receivable
turnover (166.37) and a very short
days’ receivable outstanding (2 days)
reflect that the company is selling
largely on cash.
Company H
Company H is the firm that operates a
credit-based department store. Its
receivable comprise 34.7% of its total
assets. In addition, the presence of a
very slow receivable turnover (1.86)
and a long days’ receivable outstanding
(196 days) reflect that the company is
relying largely on credit sales.
 RECEOMMNDATION ON RETAILING COMPANIES
Company G
Company G should sell more on
credit. A healthy business enterprise
allows for selling goods on credit
because it will generate more revenue
and would be attractive from the
consumers’ viewpoint. However, focus
is still on the possibility of uncollectible
accounts, but nonetheless, it is still a
necessary cost of credit sales.
Company H
Company H should improve its
financial ratios. They may be selling on
credit, but the realization of receivables
to cash is still very slow. They should
improve the collection methods which in
turn will improve receivable turnover,
and days’ receivables outstanding. Note
that selling on credit only postpones the
collection of cash, and not to make it
uncollectible.
 ANALYSIS ON ELECTRONICS COMPANIES
Company I
Company I is the firm that produces
semi-conductors, with the defense
industry as its primary market and
specializes on small desktop and hand-
held computing equipment. Compared
with Company J, its total current assets
is only 50.9% as against 60.2% of
Company K which represents that it is
less financially conservative.
Company J
Company J is the financially-conservative
firm that produces semi-conductors, which
specializes on radio and television equipment.
Its total current assets are 60.2%, 15.6 % of
which is on cash & equivalents. This means
that the company is financially conservative.
Aside from semi conductor manufacturing, it
is also involved in manufacturing of television
and radio equipment, which will explain the
other income of 3.9%.
 RECOMMENDATION ON ELECTRONICS COMPANIES

Company I Company J

Company I should be more financially Company J should maintain its being

conservative. Note that having financially conservative. They should
sufficient cash is the ultimate continue to provide sufficient cash
requirement of being liquid. Cash is still balance, enough to maintain working
what every business wants. capital necessary for operations.
 ANALYSIS ON HOTEL COMPANIES
Company K
Company K is the firm that operated a
worldwide chain of high-quality hotels
and motels in addition to a smaller line
of casinos. In contrast with Company L,
the long-term debt is much lower
(21.6%) which can be inferred that it
personally finances its operations and
does not rely too much on debt
financing, or those that are financed by
creditors.
Company L
Company L is the largest food
contractor in the country. Its financing is
through off-balance sheet limited
partnerships. This can be proven by the
percentage of long-term debt to its total
assets (46.5%). It means that hotel
operations rely too much on the
finances provided by creditors on a
long-term basis.
 RECOMMENDATION ON HOTEL COMPANIES

Company K Company L

Company K should maintain its Company L should consider the advantages

and disadvantages of relying on debt financing.
reliance on equity financing, while also It is advisable to rely on debt if the firm is liquid
taking into consideration the enough to pay its obligation upon maturity,
advantages of tapping debt in some however, there are disadvantages of debt
situations. financing the entity should consider such as: (1)
Since debt requires a fixed charge, there is a
risk of not meeting this obligation if the
earnings of the firm fluctuate; (2) Debt adds risk
to the firm; (3) Certain managerial prerogatives
are usually given up in the contractual
relationship outlined in the contract (Example:
specific ratios must be kept above certain level
during the term of the loan, restrictions in
paying dividends).
 ANALYSIS ON NEWSPAPERS COMPANIES
Financing Decision
Company M is the newspaper
company that owns a number of small
newspapers throughout the Midwest.
Broadcasting, which is its secondary
line of business accounts for the total
other income of 11.8%. In addition, the
presence of a higher “other assets”
(61.7&) results from the goodwill
stemming from acquisitions.
Investment Decision
Company N is the large flagship
newspaper that sells around the
country and around the world. As
compared to Company M, its other
assets is lower (25.2%), but since it
operates worldwide, its assets should
comprise mostly of property, plant and
equipment which corresponds to
Company N’s net PPE of 56.2%.
 RECOMMEDNATION ON NEWSPAPERS COMPANIES

Company M Company N

Company M should improve on its Company N should maintain its

broadcasting operations, since it international operations. Aside from the
provides benefit on the firm’s non-financial benefits of operating on a
operations. It would be a great mix if global market, the worldwide operation
the firm could find the balance would attract more market, and would
between the print media and visual be a cause of larger revenue. In
media operations. addition, they should utilize more their
property, plant and equipment in their
operations.
 ANALYSIS ON TRANSPORTATION COMPANIES
Financing Decision
Company O is the large national
trucking and freight forwarding
company. Since this is a service type of
business, it does not incur cost of
goods sold, which can be clearly seen
in its income statement. Majority of its
expenses are operating, which can be
inferred as the “cost of service” which
is typical for a freight-forwarding
company
Investment Decision
Company P is the railroad company.
20% of revenues was said to be derived
from real estate business which will
reflect on the company’s receivables
which comprises 18.7% of the total
assets. Its sales to assets ratio (191%)
reflects that it has diverse and high
selling products like real estate.
 ANALYSIS ON TRANSPORTATION COMPANIES

Company O Company p

Company O should reduce the cost of Company P should improve on its real
service at a reasonable level. Note that estate business, since, like Company M
incurring more costs would decrease in the Newspaper industry, it provides
net income. additional benefits on the company.