Sie sind auf Seite 1von 4

Managerial Accounting

Group assignment 2
Contributors:
1. Sarunpat Wachirasereechai 111081
2. Md. Afzal Jamil 111082
3. Sujana Pradhan 111118
4. Wiwan Panpanit 111121
5. Varun Prakash 111133

Case 13-3 Identify the Industries

This case provides financial statement data and aims to analyze the common-sized
balance sheet and ratios of 12 companies in order to identify their respective industries.
The companies involved are
- Regional bank
- Temporary office personnel agency
- For-profit hospital chain
- Warehouse club
- Major passenger airline
- Major regional utility company
- Manufacturer of oral, personal, and household care products
- Hotel chain
- Upscale department store chain
- Discount department store chain
- International oil company
- Defense contractor

Based on the balance sheet, 12 companies are analyzed by common characteristics


of companies operating, which can distinguish between individual companies.

Type of business: Service

A = Major passenger airline


E = Regional bank
G = For-profit hospital chain
J = Hotel chain
K = Temporary office personnel agency

In case 13-3, There are 5 service companies, which are regional bank, temporary
office personnel agency, for-profit hospital chain, major passenger airline, and hotel chain.
The common characteristic of service industry is almost no inventories and negligible
inventory turnover. In balance sheet, the 5 columns that related with this explanation are
A, E, G, J, and K because the ratios of inventory turnover of the companies are not
meaningful, even if calculable. The ratios of inventories in those columns are quite low.
Column E should be regional bank because banks have very high percentage of
account payable (84.7%), which they have to pay back on the depositors’ request. Banks
are usually highly leveraged. Thus, stockholders’ equity (7.9%) is quite low.
Column A should be major passenger airline because of the highest percentage of
unearned revenues in column A (11.6%). Highly unearned revenue of airline business
become from booking and paying in advance of airline passenger.

Page 1 of 4
Column K should be temporary office personnel agency. Other than the data of
inventories, the data of plant and equipment of column K also proved that it is a balance
sheet of temporary office personnel agency. Since, this office is temporary. Company may
not have a lot of plant and equipment.
Column J should be hotel chain because of the ratio of goodwill (17.6%) and the
ratio of investment also highly (10.5%), which is the fact of hotel business that have to
have investment.
Column G should be for-profit hospital chain.

Type of business: Manufacturing

C = Manufacturer of oral, personal, and household care products


I = Defense contractor

Manufacturing industries from this case are defense contractor and manufacturer of
oral, personal, and household care products, which must have the highly ratio of plant and
equipment. Column C and I are two columns that have the highest ratio of plant and
equipment (71.7% and 81.1%). Thus, it is possible that column C and I will be the balance
sheets of defense contractor and manufacturer of oral, personal, and household care
products respectively.
The different between C and I is the ratio of inventories which are 6.2% and 1.6%
respectively. Column C has the percentage of inventories more than column I. Thus,
column C should be manufacturer of oral, personal, and household care products. Column I
should be defense contractor.

Type of business: Merchandizing (Wholesaling and Retailing)


B = Upscale department store chain
F = Warehouse club
L = Discount department store chain
In this case, warehouse club, upscale department store chain, and discount
department store chain are merchandizing industry, which must have high and similar
inventory level and leverage ratio of merchandizing industry should be nearly identical. The
top three columns that have the highest ratio of inventories are column B, F, and L.
Column B should be upscale department store chain because the ratio of goodwill in
this column is quite high (25.7%) which is true that upscale department should have high
goodwill because of their affluent customers.
Column L should be discount department store chain because inventory turnover of
this column is quite high (11.9%).
Column F should be warehouse club which is wholesaling. Thus, when compare with
other, this column will have the highest ratio of inventories (42.6%).

Type of business: Mining

D = Major regional utility company


H = International oil company

The last two columns are column D and H which could be international oil company
and major regional utility company.
Column H should be international oil company because it has the ratio of goodwill
(35.9%). Due to oil company is international company, it must have goodwill. So, Column
D should be major regional utility company.

Page 2 of 4
Case 13-4: Supplement to identify the industries

According to the case, there are 7 firms which can divide to 4 types as following:
1. Service
2. Manufacturing
3. Merchandizing
4. Other

Type of business: service

A: Coal-carrying rail road


G: Advertising agency
Common characteristics of a service company are almost no inventories and less inventory
turnover. As you can see in the exhibit, A and G have no inventories. Thus, A should be a
coal-carrying rail road and G going to be advertising agency. Also, a coal-carrying rail road
should have higher plant and equipment as compared with an advertising agency as shown
by 78.7 and 7.4 respectively.

Type of business: Manufacturing

B: Maker of name-brand, quality men’s apparel


C: Automobile manufacturer
Manufacturing companies usually have high plant and equipment. Therefore, we narrow
down on B and C as maker of name-brand, quality men’s apparel and automobile
manufacturer respectively. Also, automobile manufacturers tend to have higher percentage
of assets attributed to investment/s in affiliated companies (18 for C as compared with 10.8
for B). Also, we notice that C has 12.8 under notes payable which makes sense because an
automobile manufacturing process is technically more complex and involves many different
components / parts which are often, expensive. So, the automobile company may have
some written short-term obligations with their suppliers to pay them back at a later date.

Type of business: Merchandizing

E: Retail Jewelry chain


F: Basic chemical company
Companies in this category also tend to have a relatively high and similar inventory level,
so we have E and F with inventory levels of 61 and 49.2 respectively. Also E has higher
accrued taxes (Amount of taxes owed, based on income earned or a property value
assessment, but not yet paid) as compared with F. Also, by logic, a basic chemical company
should have more plant and equipment than a jewelry chain. Finally, both jewelry and
chemical plants would tend to have a low inventory turnover as the value of jewelry of
wouldn’t depreciate / fluctuate much over a period of time. Similarly, chemicals are not
perishable and could be kept in the inventory for many days without many consequences
until a customer order is placed.

Type of business: Others

D: Meat packer
We know that meat is a perishable product that can go bad very quickly. So, by looking at
the high inventory turnover for D i.e. 23X we conclude that this must be the meat packer

Page 3 of 4
because, the packaged meat must be sent out from the inventory as soon as possible to the
retailers (supermarket / poultry shop) otherwise, it would not be fresh.

Page 4 of 4