Case Analysis of Unidentified Industries--2006
`Case analysis of Unidentified Industries--2006
Although different industries have their own characteristic, we can see some common features in certain industries. Thus we divide them into 4 kinds: Service, retail trade, manufacturer and online seller. List as below:
Classification of Different Industries and their features
1. Service (Table 1)
Advertising agency (AG)
Commercial bank
Health maintenance organization (HMO)
→Their services are based on human resources. They do not need a lot of PP&E or inventories and lots of money (like long-term debt). Since they provide their service first and the customers always pay at the end of the service, their account should be high. So now we want to find an industry that is zero inventories, low PP&E, high accounts receivable and low long-term debt. See the table 1, we find E, G and N each has a very high accounts receivable, low inventories and PP&E. It shows that they are all service industries. Now we have to look deeply to find the difference among these three industries.
First, N has an extremely high accounts receivable (90%) and the longest receivables collection period (4,071 days). And their biggest part of liabilities is notes payable. It really meets the features of Commercial bank. So N is Commercial bank. What the different between E and G? We find that their percentages of balance sheets are almost the same. So we have to find some clues from selected financial data. It shows that their Receivables collection period and Revenue/total assets are pretty difference. With common sense, we know that HMO will have a longer Receivables collection period (They provide the service first and wait for the insurance company to pay for their service fee) and lower Revenue/total assets (Since AG is a pretty low cost industries, all we need is idea and time) when compares with AG. So G is AG and E is HMO.
Result:
Advertising agency (AG) → G
Commercial bank → N
Health maintenance organization (HMO)
Although different industries have their own characteristic, we can see some common features in certain industries. Thus we divide them into 4 kinds: Service, retail trade, manufacturer and online seller. List as below:
Classification of Different Industries and their features
1. Service (Table 1)
Advertising agency (AG)
Commercial bank
Health maintenance organization (HMO)
→Their services are based on human resources. They do not need a lot of PP&E or inventories and lots of money (like long-term debt). Since they provide their service first and the customers always pay at the end of the service, their account should be high. So now we want to find an industry that is zero inventories, low PP&E, high accounts receivable and low long-term debt. See the table 1, we find E, G and N each has a very high accounts receivable, low inventories and PP&E. It shows that they are all service industries. Now we have to look deeply to find the difference among these three industries.
First, N has an extremely high accounts receivable (90%) and the longest receivables collection period (4,071 days). And their biggest part of liabilities is notes payable. It really meets the features of Commercial bank. So N is Commercial bank. What the different between E and G? We find that their percentages of balance sheets are almost the same. So we have to find some clues from selected financial data. It shows that their Receivables collection period and Revenue/total assets are pretty difference. With common sense, we know that HMO will have a longer Receivables collection period (They provide the service first and wait for the insurance company to pay for their service fee) and lower Revenue/total assets (Since AG is a pretty low cost industries, all we need is idea and time) when compares with AG. So G is AG and E is HMO.
Result:
Advertising agency (AG) → G
Commercial bank → N
Health maintenance organization (HMO)