The Financial Detective

PAPER We believe that family I represents the Sm every last(predicate)er Producer of print papers and attach to J represents the Worlds Largest Market of Paper. Being the worlds largest paper maker indicates having a larger inventory, more electric menses pluss (esp. since it owns timberland and several facilities), and senior high cost of goods sold than other paper makers. The inventory for Company J (10. 9) is larger than the inventory for Company I (8. 8) the current assets for Company J (32. 6) be higher(prenominal) than that for Company I (27. 2) and the cost of goods sold for Company J (82. 9) is higher than that for Company I (75. ). We overly run that, as the worlds largest paper maker, their products will move on the grocery storeplace better than a smaller producer of paper. Thus, Inventory Turnover should also be higher. Here, Company J (7. 11) has a larger inventory turnover than Company I (6. 75). Receivables turnover, which tells how many times accounts rec eivables go been collected in a given period, should be higher for the worlds largest paper club than it would be for a small producer of specialty paper. Company Js (11. 64) receivables turnover is higher than that for Company I (8. 68).The facts also state that the worlds largest maker of paper has been rationalizing capacity by closing inefficient mills, implementing cost-containment initiatives, and selling nonessential assets. This implies that the political party would have a larger asset turnover ratio than other paper companies. Company J (1. 20) has a larger asset turnover ratio than Company I (. 73). It is probable that since the small producer of paper has most of its product marketed under branded labels, that it would have a higher value of Intangibles, such as trademarks, than the larger smart set.Here, Company I (14. 6) has an intangibles value that is significantly higher than Company Js (1. 9) intangible value. establish on the above analysis, we believe that C ompany I is the small producer of printing, writing and technical specialty papers, and that Company J is the worlds largest maker of paper, paperboard, and packaging. sell From the fiscal ratios and the notes attached, it is apparent that Company N is the rapidly growing chain of upscale discount stores while Company M is the firm known for its first base prices, breadth of merchandise and volume riented schema. assetS Receivables Company M has lower receivables of 1. 4 compared to company N with 17. 0 and this author is to the fact that company N offers opinion to qualified node as a means of marketing dodge. Inventories Company M has higher inventories of 24. 5 compared to company N with 16. 7 and this reason it attributed to the strategy company M adopts. Company M has a wide breadth of merchandise and volume oriented strategy amount to this high inventories on the balance sheet. Intangibles There is a 93. 3% difference compared to company N with low intangibles. This re ason is due to the operational strategy company M adopts. Company M possesses either or all of these following Goodwill, Partnership rights or Patent rights. Analyzing the information provided accurately, one or more of the of the aforementioned rights exit because for company M to sell some products at very low prices, at that place must be an existing kind of memorandum of understanding between the producers and company M. LIABILITIES & virtue Deferred Taxes Company M has deferred Taxes of 3. with company N having O. From the information of company M provided, it is possible that the deferred tax is an evidence of capital gains that might have risen from the government issue of divestments of several non-discount department-store businesses. Debt in Current Liabilities Company M is 75. 4% high than company Ns Debt Current Liabilities. This can be as a result of the choose contract entered by company M. Depending on the lease agreement Company M might have an overdue payment fo r the lease for a period within a year. INCOME STATEMENTDepreciation It is understandable why company N has a high depreciation than company M and this is due to the reason that M is a lease copy therefore no depreciation is paid for leasing except a rental payment. There is an exception when the lease is a finance lease. Net Income Company N strategies pay off because shareholders of any company want to maximize their investment or returns. Company N is making almost double of company Ms net profit, and also considering the fact that company N is making 85% of company M sales. MARKET DATABeta Companies in the same industries usually have different betas, one of the reasons this can happen is the kind of financing or debt equity ratio. The higher the debt equity ratio the higher the beta this shows why company N has a higher beta compared to company M that has a lower debt equity ratio. Dividend Payout Company M has a higher payout ratio of 31. 12%. Reason why company N might have a low payout ratio can be attributed to investment in future projects with positive NPV due to the rapidly growing chain of upscale discount stores. summation MANAGEMENT Receivables Turnover This shows the degree of realization in accounts receivables. Company N has a lower turnover rate, a lower rate implies that receivables are universe held keen-sighteder and the less likely they are to be collected. Also there is an opportunity cost of tying up funds in receivables for a long period of time. Company M is 29 times higher than company N. From the above analysis, it is obvious that financial ratios of companies in same industries can never be the same but can only be similar.The kind of strategy and technology a company adopts tells a lot about differences in financial ratios. COMPUTERS We believe that Company E is the company focused exclusively on mail-order sales and Company F is the company that sells a highly differentiable gillyflower of products. In this industry one comp any focuses exclusively on mail-order sales of built-to-order PCs, including desktops, laptops, and notebooks. Besides the company allows its customers to design, price and purchase through its web site.In line of merchandise the other company has a retail strategy intended to drive traffic through its stores. With regards to the SGA expense, as well as depreciation, we can assume that the company resulting with the highest values is of course the one having more stores compared to the one conducting most of its transactions on an online basis. In this case the high value of 23. 1 in selling, ordinary and administrative expense and the high value of 1. 8 in depreciation belonging to company F fit the description of the company with more retail stores.Another important financial data confirming this finding is the intangible data. From the Exhibit 1, the company E has a value of 0 in intangibles which is not surprising due to its business orientation. Company E is an assembler of P C components manufactured by its suppliers, therefore not having any claim of ownership of intangibles. On the other hand, the intangible value of 1. 2 of company F is due to the fact that company F has a variety of proprietary software products. In addition, the price to book ratio is lower for Company F (5. 3) than for Company E (17. 46). This is in line with our analysis because the facts state that the retail store has a declining market share, so the lower price to book ration would match the description for a company with a lower market share. Based on our analysis above, we believe that company E is the company focusing exclusively on mail-order sales of built-to-order PCs, and company F is the company having an aggressive retail strategy intended to drive traffic through its stores. NEWSPAPERSWe believe that company P is the diversified media company that generates most of its revenues through newspapers sold or so the country and around the world and that Company O is the firm that owns a number of newspapers in relatively small communities throughout the Midwest and southwest. We believe this because Company P has a larger amount of current assets (other and total) and net fixed assets than CompanyO. Company P operates in not just the United States but it also operates in countries all around the world, which it means it will have a lot of assets than Company O.FINANCIAL STATEMENT ANALYSIS plusS RECEIVABLESCompany P is higher than Company O and this can be attributed to the fact that company P has an international presence. This will result to a huge customer base compared to Company O. higher customer base would yield more credit sales. result to its revenues all over the world in the sense that it will have a lot of customers and there can be delays in monetary transactions. Since its business has international presence it can adopt a business strategy of offering a high volume of credit sales to customers.INVENTORIES The two companies are at par have the same ratios. This means that there is an equal amount of goods and services available in the stock of both companies. INTANGIBLES Company O has a higher intangibles value than company P because although company O is a smaller company it has acquired a Customer good will, employee morale, increased bureaucracy, and aesthetic appeal than company P which is a more diversified media company. DEBT MANAGEMENT TOTAL DEBT/TOTAL ASSETCompany P has a higher ratio compared to O.Most of companys total debt are short term financed and this is to say that in the side by side(p) period, the company can have a lower total debt to total asset ratio compared to company O. Based on this current standing it shows that 26. 81% of companys P asset is financed by debt. INCOME/EXPENSES NETINCOME Company O is almost likely to succeed more than company P in its trading operations because of its change decision making and administration. Looking closely at the net income figure of both companies, company O net income is higher than company P net income.EBIT AND NET PROFIT MARGIN Company O has a higher EBIT because the company is more profitable than company P. Company P has a lower net profit margin value than company O which indicates a low margin of safety, higher risk, and that a decline in sales will erase profits and result in a net loss. Company O is better in this aspect because of the adopted business of decentralized decision making and administration, which led to better success in its operations. MARKET DATADIVIDEND PAYOUT Company O has a higher ratio than company P which means it has a higher percentage of earnings paid to its shareholders in dividends. The shareholders of company O are benefiting better from the company than the shareholders of company P are. The reason for this could be that company P may be trying to invest in a project that is preventing it from paying shareholders adequate dividends BETA Company P has a higher value which means a higher exp ected return of a stock or portfolio which is correlated to the return of the financial market as a whole than company O.PRICE/EARNING RATIO Company O has a higher ratio than P. Over the years smaller firms have performed better in terms of returns. Shareholders of company O are willing to pay more for the shares today in anticipation of great prospects of returns in the future. ASSET MANAGEMENT RECEIVABLES TURNOVER Company O has a higher turnover value because it has a higher number of number of times that account receivables are collected during in a period than company P. LIQUIDITYCURRENT RATIO AND QUICK RATIO Company O has a better and higher value of the two ratios than company P so it means that company O has more current assets and cash equivalents to cover its liabilitie when due than company P. Based on our analysis above, we believe that company P is the diversified media company that generates most of its revenues through newspapers sold around the country and around the world and that Company O is the firm that owns a number of newspapers in relatively small communities throughout the Midwest and Southwest