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Case Studies in Finance Company G & H Essay

Company G deals mostly in selling books in a large retail setting, however they implement a concept that is more community-based. Company H deals in a variety of media, including books, music, and video along with electronics and other varieties of merchandise. Not only does Company H differ in merchandise variety, but it also differs from Company G in that it is internet-based only and is highly interested in further corporate acquisitions—very different from Company G’s “community store concept”. Bruner, Eades, & Schill, 2010, pp. 96-97).

Since Company H has a variety of merchandise to sell, along with its interest in acquisitions; it has a significantly higher level of net fixed assets than that of Company G. Acquisitions will always increase the level of net fixed assets. Since Company G tends to implement a strategy that does not favor large acquisitions, its level is lower at a level of 7. 6 versus 24. 4 in Company H.

Company H also exceeds Company G in most of the liabilities section, which automatically gives Company H a leg up in being able to take on more liabilities such as credits and loans. However, Company G comes out winning in terms of income and expenses, with a net income of 8. 5%. Company H’s net income ended at 2. 9%. This also relates to lowered percentage of SG&A expenses on Company G’s side, higher interest income, special items income, and its lower percentage of income taxes.

Company G is also considered to be more liquid than Company G, with a current ratio of 1. 57 versus Company H’s 1. 49. This indicates that while Company G has more liabilities, it is better-able to pay its short-term liabilities than Company H. It is understandable why Company H keeps its liabilities slightly lower so that they do not become overwhelmed with short-terms loans and notes that it will not be able to pay back on time.

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