Case 6 - The Financial Detective
Week 1: Case 6 “The Financial Detective”
From the case study of The Financial Detective, 2005 the objective is to place the correct company to match the given financial data and ratios. I will analyze and compare the financial ratios of the companies in each industry and interpret them to identify the correct company.
Health Products:
Company A is Johnson and Johnson (J&J) as it is evident based on its financials. The cost of goods sold is twice as higher as Company B because J&J has a very broad range of products that would require many different resources and suppliers. J&J has a high inventory and receivables turnover mainly because it is reflecting its mass-marketing strategy. Also because J&J mass markets its broad line of products, they have high net fixed assets as they produce in large amounts of volume that would require many manufacturing facilities and equipment in order to produce all of their products. J&J has a much higher ratio of cash, short term investments and receivables that is evidence that it has cash on hand and large production facilities.
Company B is Pfizer and clearly has a much higher ratio of intangibles that comes from their patented products which has led them to higher premiums to support their robust R&D budget. Cost of goods sold is lower because they produce more over the counter products that do not require any further extensive research.
Beer:
Company C is Anheiser-Busch which owns a numbers of beer-related businesses they have acquired which corresponds to their very high debt ratio at 51.19% to be able to finance these acquisitions. They also have a high amount of net fixed assets needed to manufacture their products in their many breweries and theme parks.
Company D is Boston Beer because they have such a smaller net profit margin due to their smaller production in volume. Even though they have higher prices, it takes more resources to produce their seasonal and year-round beers and therefore their SG&A
From the case study of The Financial Detective, 2005 the objective is to place the correct company to match the given financial data and ratios. I will analyze and compare the financial ratios of the companies in each industry and interpret them to identify the correct company.
Health Products:
Company A is Johnson and Johnson (J&J) as it is evident based on its financials. The cost of goods sold is twice as higher as Company B because J&J has a very broad range of products that would require many different resources and suppliers. J&J has a high inventory and receivables turnover mainly because it is reflecting its mass-marketing strategy. Also because J&J mass markets its broad line of products, they have high net fixed assets as they produce in large amounts of volume that would require many manufacturing facilities and equipment in order to produce all of their products. J&J has a much higher ratio of cash, short term investments and receivables that is evidence that it has cash on hand and large production facilities.
Company B is Pfizer and clearly has a much higher ratio of intangibles that comes from their patented products which has led them to higher premiums to support their robust R&D budget. Cost of goods sold is lower because they produce more over the counter products that do not require any further extensive research.
Beer:
Company C is Anheiser-Busch which owns a numbers of beer-related businesses they have acquired which corresponds to their very high debt ratio at 51.19% to be able to finance these acquisitions. They also have a high amount of net fixed assets needed to manufacture their products in their many breweries and theme parks.
Company D is Boston Beer because they have such a smaller net profit margin due to their smaller production in volume. Even though they have higher prices, it takes more resources to produce their seasonal and year-round beers and therefore their SG&A