Unidentified industries Essay
Looking at the balance sheet of firm A, we can notice several things right away. We can see that a large chunk (54%) of its assets is in cash and marketable securities. From this fact we can deduce that this firm does a majority of their business with consumers and not other businesses. On the liabilities side, we can see that the company has large percentages of accounts payable and long-term debt (37% and 41% respectively). When we put these pieces of information we can see how a department store can have financial data that is consistent with firm A. The majority of transactions would be cash sales; however the company still has some accounts receivables, this could be explained by the customers who choose to use the department store’s own credit card. The large amount of accounts payable is used to buy inventory for the department store. The large chunk of long-term debt can be explained by the loans the firm took out to pay for the expensive space that their stores take up. Department stores are very large and are often located in malls, where space is expensive. FIRM B- Retail Drug Chain
Firm B’s balance sheet shows that the firm has few accounts receivable, a lot of liabilities, including a significant percentage of other liabilities. It also has a large percentage (42%) of its assets allocated to inventory. This suggests that the firm is likely to be a retail firm. The large inventory percentage suggests that the goods sold at the firm would be of high value. This would fit the model of a retail drug chain. The drugs sold at a retail drug chain would have a high value and that the fact that there is not that many accounts receivable, suggests that the firm would most likely be conducting business with customers directly and not other firms. The high amount of other liabilities can be explained by the extra costs that are associated with a store that carries drugs, such as increased insurance premiums. FIRM C- Online Direct Factory to Customer Personal Computer Vendor
Firm C has very little inventory, yet it has large percentages of cash and other marketable securities as well as accounts receivable (39% and 24% respectively). Furthermore, it has a very large percentage (42%) of accounts payable. This suggests that the firm acts as an intermediary who buys from other firms as sells to consumers. What is also interesting is that it has very little inventory. This would fit the description of an online direct factory to customer personal computer vendor. The accounts payable would be from the manufacturer of the computers and the accounts receivable and cash would come from the consumers. Since the product goes directly from the factory to the customer, it would explain why the firm does not have a lot of inventory. FIRM D- Pharmaceutical Manufacturer
Firm D has a large percentage of other assets (46%), yet it has relatively low percentages of every other asset category. This is interesting and suggests that the firm may have a focus on research and development over the sale of their products. A pharmaceutical manufacturer fits the description as they are focused on the development of new drugs. This would mean that a large chunk of “other assets” consists of intellectual property of the chemical makeup of their drugs. FIRM E-Advertising Agency
Firm E has very little plants and equipment and has no inventory, which suggests that it would a firm that mainly provides services. Furthermore, the accounts receivable is roughly equal to the account payable suggesting that this is a very “flow-through” company where they act as an intermediary. An advertising agency that includes the use of commissions would fit this description. Advertising agencies provide services, which would explain the lack of inventory and often work with other firms, thus accounting for the accounts receivable and accounts payable. FIRM F- Computer Software Developer
Firm F has a large percentage of assets allocated towards cash and marketable receivables as well as other assets (49% and 25% respectively). This would suggest that the company has a product that they are selling that is aimed mainly for cash sales to consumers and has some intellectual property value to it, explaining the “other assets” percentage. Furthermore, the firm has very litter plants and equipment, eliminating the possibility that it is a retail operation. This would fit with the model of a computer software developer who has claims to intellectual property for their software and who also sells their software directly to the end user. FIRM G- Health Management Organization
Firm G has a large percentage of assets consisting of accounts receivable (51%), yet it has no inventory. This would suggest that the firm is based on services that require payments in installments. Furthermore, it has a large percentage (46%) dedicated to accounts payable suggesting that it is making payments to other firms. A health management organization would fit this description because it receives payments from customers and would pay hospitals and other health care providers. HMOs act as liaisons between consumers and health care providers and the financial data for Firm G would be suggest that it the case. FIRM H- Airline
Firm H has very low inventory, yet it has a very high percentage of plants & equipment. This would suggest that the firm is engaged in a service-intensive industry. The airline industry would fit this description as they provide services (namely flights) to customers in extremely expensive equipment (planes). FIRM I- Retail Grocery Chain
Firm I has a large percentage of inventory and plants & equipment (22% and 55% respectively, as well as a large percentage (33%) allocated to long-term debt. This would suggest a retail store of some kind. A retail grocery chain would have a large inventory that they use to stock their shelves as well as plants and equipment such as the buildings, refrigeration, etc. to operate properly. This high capital investment would be funded via long-term debt, explaining the long-term debt of Firm I. FIRM J- Family Restaurant Chain
Firm J has a moderate amount of inventory as well as a high percentage of long-term debt. The long-term debt suggests that the firm financed several buildings for their operations. The inventory suggests that there needed to be enough inventory but there cannot be too much inventory, opening up the possibility that the inventory is perishable. This would fit the model of a family restaurant chain, being that there is a lot of long-term debt involved in opening multiple restaurants and that the inventory of a restaurant is perishable and must be at the perfect level in order to prevent waste and provide the freshest ingredients. FIRM K- Bookstore Firm K has large percentages of inventory as well as plant &equipment (35% and 41% respectively. It also has a fairly large percentage of accounts payable (24%). This would suggest a physical location where revenue is generated by this firm. A bookstore would have a lot of inventory located in their retail locations for consumers to purchase. The account payable can be explained by the purchases of the books by the bookstore. The bookstore does not produce the books themselves and therefore must go to other firms to stock their shelves. The accounts payable is indicative of a firm conducting business with other firms. FIRM L- Electric & Gas Utility
Firm L has very little inventory, yet it has a very large percentage of plant & equipment (69%), it also has a sizable percentage of other liabilities (30%). This would suggest the firm is service orientated. An electric and gas utility firm would have a lot of infrastructure that is needed to provide utilities to their customers and it would also have greater insurance premiums due to the potential danger caused by their equipment malfunctioning or theft of their infrastructure (i.e. copper wires). Furthermore, Firm J is the only firm that we looked at that has preferred stock. This would be consistent with an electric and gas utility company as they are often quasi-monopolies and have little room to grow. These firms will often issue preferred stock in order to attract investors.
FIRM M- Commercial Bank
Firm M has no inventory and a large percentage for plants & equipment (66%). This suggests that this company is a company that is wholly service based yet operates in physical locations. A commercial bank that orders book directly for their consumers from the publisher would fit this bill. The commercial bank would not have any inventory and the plants and equipment percentage would be accredited to the physical buildings in which the bank would operate. Firm N- Online Bookstore
Firm N has no inventory, yet it has a large percentage of accounts
receivable (90%). It also has a large percentage of notes payable (73%). This would fit the description of an online bookstore, the account receivables would come from the customers who purchased merchandise and is paying it back on a periodic basis. Also, there is no inventory or plants and equipment, which suggest that the online bookstore is an extremely minimalist operation that is characteristic of many online enterprises.