Financial Analysis

In this assignment you will be given balance sheet and income statement data for companies in different industry sectors. You will use this information to derive insights about the operations of the different companies, their industry sectors, and their identity.

Details

In modules 2 and 3 we discussed how the balance sheet and income statement, and the ratios derived from them can be used to assess aspects of the management of companies.   In this exercise, you will identify industry sectors and companies based on their balance sheet and income statement.

Purchase “Case of the Unidentified Industries – 2018” from Harvard Business Publishing using this link:

https://hbsp.harvard.edu/import/743887 (Links to an external site.)

Answer the following questions based on the information provided in the case.

1. What companies have zero inventory, and what does that tell you about their industry sector? (10 points)


2. Of the companies with zero inventory, which are the most capital intensive? (10 points)


3. Identify the two companies that are the most capital intensive and have zero inventory. (5 points)


4. What companies have accounts receivable collection periods of fewer than 30 days? (5 points)


5. What industry segment are the companies with accounts receivable collection periods of fewer than 30 days likely to be in? (10 points)


6. What company has the longest accounts receivable collection period, and how long is it? (5 points)


7. Bonus question (5 points) Based on the kind of service that has this length of payback, identify the company with the longest collection period.


8. Which company has the highest inventory turnover? (5 points)


9. What is the highest turnover and how many days of inventory is carried? (10 points)


10. Of the companies listed, identify the one that is likely to have the highest inventory turnover. (5 points)


11. What company has the highest operating profit margin, and what is its profit margin? (5 points)


12. What can you infer about the liquidity of the company with the highest operating profit margin, and how did you infer it? (5 points)


13. Which company is the most highly leveraged in terms of using debt to finance its assets? (5 points)


14. Which company has the greatest difference between the current ratio and the quick ratio? (10 points)


15. What drives the difference between the current ratio and the quick ratio? (10 points)


16. Bonus question (5 points).  This company with the greatest difference between the current ratio and the quick ratio is also losing money.  Based on profit margin and your answer to question 15, identify the company.

Assessment

Point values for each question are stated above. Each question will be evaluated based on the following criteria:

1. Your understanding of the uses of balance sheet and income statement metrics and ratios.


2. Your ability to derive insights from the data provided.


3. The clarity of your logic, and the accuracy of your answers.