Identify Industry

• First, let us group the industries – several groups with broadly similar attributes : • Financial Industry o Commercial Banking

Identify the Industry

• Retail Industry o Retail Grocery Store

• High-technology industries o Computer Software o Pharmaceutical Preparations o Semiconductor Manufacturer

• Service Industry
• • • • • IT Service Provider Mobile phone service provider Commercial airline Integrated Oil and Gas Liquor producer and distributor

• Capital Intensive Industries

Detailed Financial Characteristics of each industry
• Financial Industry
High Receivables (Loans) High Payables (Deposits) Large ratio of assets to shareholders’ equity (du Pont leverage) Low Asset turnover ratio May have high G P Ratio (GP = Net Interest Margin = Interest revenue less interest income) o Little inventory ???? o o o o o

• So 2 seems to be Commercial banking industry

Detailed Financial Characteristics of each industry
• Retail Industry o Low GP Ratio o Low Returns on Sales o High Asset Turnover Ratio • 1, 4 & 5 o Lots of inventory ???

• So 1 seems to be Retail Grocery Industry

Detailed Financial Characteristics of each industry
• High technology Industries – Software, pharmaceutical & semiconductor o High R & D expenditure • 6, 7 & 8 o High day’s inventory (high WIP) • 7 o Between Software & semiconductor – high Fixed Assets (PPE)? • Semiconductor • 6 o So 8 is Computer Software

Detailed Financial Characteristics of each industry
• Now 3, 4, 5, 9 & 10 remain unidentified • Service industry – IT service provider & Mobile phone service provider o Little Inventory • 5, 9 & 10 o High current receivables • 5 & 10 o So these seem to be the 2 service industry o Who will have more receivables as proportion to assets ? • IT service provider • So 5 is IT service provider o So 10 is Mobile phone service provider

Detailed Financial Characteristics