Financial Detective, 1996

Case 6, Financial Detective, 1996

NEWSPAPERS :

1) Centralized (Worlwide) - NEW YORK TIMES Fierce competition price depends on the market More efficient ° Higher inventory turn L ° Beta closed to 1.00 (worldwide) L

2) Decentralized (Midwest) - LEE ENTREPRISE Monoplolist price like you want ° Higher gross margin K ° Higher other assets (goodwill) K

STEEL :

1) Big - INLAND ° Lower receivable turn O ° higher D/E (older, stable) O

2) Small - NUCOR ° Higher P/E P ° Higher margins P

BEER :

1) National - ANHEUSER-BUSCH ° Higher inventory turnover M ° Higher debt to equity (more debt than cash) M

2) Micro - BOSTON BEER CO. ° Higher P/E ratio (young) N ° Higher A/P (outsourcing) N ° Higher ROA (not lot of assets) N ° No dividend (IPO) N ° Higher cash (IPO) N ° No Beta (IPO) N ° Higher gross margin (niche market) N

RETAIL

1) National - SEARS ° Lower receivable turn G ° Higher D/E G

2) Cat. Killer - HOME DEPOT ° Lower gross margin H ° Higher P/E (fast growing) H ° Inventory (only assets) H ° Higher assets turnover (doesn’t have any assets) H

HEALTH PRODUCTS

1) Mass Market - J & J ° Higher inventory turnover A ° Higher receivable turnover (quicker) A

2) Ethical - Lily ° Higher gross margin (patterns, monopolistic) B

HOUSEHOLD APPLIANCES

1) Quality (own brand name) - MAYTAG ° High gross profit C ° Net Loss (crisis, bad year) C

2) Captive (private labels) - WHIRLPOOL ° Higher Inventory turn (no really significant) C ° Lower receivable turnover D ° Lower current ratio (predictable, stale business) D

HOTELS

1) Quality - HILTON ° High profit margin I ° High cash (casino) I ° High fixed assets (own hotels) I

2) Service - MARRIOTT ° High gross margin (service, no COGS) J ° Higher A/P J ° Higher Inventory turn J ° High asset turn J

COMPUTERS

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