Case 7 Financial Detective
Health Products:
Company A is Johnson & Johnson, which is a diversified manufacturer of prescription pharmaceuticals, health and beauty aids, over-the-counter drugs, and medical devices. Company B is Pfizer Inc., which develops, manufactures, and markets patented pharmaceuticals such as Liptor and Celebrex. The most significant strategic differences between the two firms lie in their product mix and their customer focus. J&J sells most of its products directly to the consumer while Pfizer sells exclusively to doctors and institutions.
Firm B has intangibles worth more than twice as much as firm A, which may reflect firm’s B’s higher investment in R&D. Firm B may also have higher intangibles due to their ownership of patents and its investments in licensing arrangements.
Firm B’s gross margin is more than 12% higher than company A’s, which reflects the higher input costs for company A’s medical diagnostics and devices product segment.
Company A has a far quicker inventory turnover than company B. Company B sells almost exclusively to institutions and pharmacies, which usually take longer to exhaust their supplies compared to company A, who markets its consumer products to retailers, which have a higher turnover orientations.
Many of company A’s and B’s products are branded consumer products that command a price premium. However, company B’s premium is higher, reflecting the benefits of patent protection on prescription pharmaceuticals, and the additional returns needed to support company B’s large R&D efforts.
Beer:
Company C is Anheuser-Busch Companies Inc., which is a producer and marketer of a number of mass-market beers such as Budweiser, Michelob, and Busch. Company D is the Boston Beer Company, which is the seller of the popular Sam Adams line of beers. Boston beer’s products are part of a microbrew.
Company D’s proportion of cash and cash equivalents, which is extremely higher than company C’s show their conservative approach to its financial
Company A is Johnson & Johnson, which is a diversified manufacturer of prescription pharmaceuticals, health and beauty aids, over-the-counter drugs, and medical devices. Company B is Pfizer Inc., which develops, manufactures, and markets patented pharmaceuticals such as Liptor and Celebrex. The most significant strategic differences between the two firms lie in their product mix and their customer focus. J&J sells most of its products directly to the consumer while Pfizer sells exclusively to doctors and institutions.
Firm B has intangibles worth more than twice as much as firm A, which may reflect firm’s B’s higher investment in R&D. Firm B may also have higher intangibles due to their ownership of patents and its investments in licensing arrangements.
Firm B’s gross margin is more than 12% higher than company A’s, which reflects the higher input costs for company A’s medical diagnostics and devices product segment.
Company A has a far quicker inventory turnover than company B. Company B sells almost exclusively to institutions and pharmacies, which usually take longer to exhaust their supplies compared to company A, who markets its consumer products to retailers, which have a higher turnover orientations.
Many of company A’s and B’s products are branded consumer products that command a price premium. However, company B’s premium is higher, reflecting the benefits of patent protection on prescription pharmaceuticals, and the additional returns needed to support company B’s large R&D efforts.
Beer:
Company C is Anheuser-Busch Companies Inc., which is a producer and marketer of a number of mass-market beers such as Budweiser, Michelob, and Busch. Company D is the Boston Beer Company, which is the seller of the popular Sam Adams line of beers. Boston beer’s products are part of a microbrew.
Company D’s proportion of cash and cash equivalents, which is extremely higher than company C’s show their conservative approach to its financial