The Financial Detective 2005
Part 1 : Examine and analyze the financial ratios for eight pairs of unidentified companies and match the description of the company with the financial profile derived from the financial ratios.
Beer
Company D has higher current ratio and quick ratio which is higher 2.43x and 2.3x respectively. This was because Company D had higher cash and short term investment which was 55.6% while Company C only has 1.4%. It proves that Company D is financially conservative and it matches with the second described company.
Beside that, Company D keep more stock which is 11.9% compare with Company C 4.3% because their company produces seasonal and year round beers with smaller production volume and their beers’ demand is not whole year long. Hence slower sales in Company D will have lower inventory turnover with higher inventory.
There was no dividend payout for Company D whereas the Company C they have high dividend payout ratio due to stable product sales which not affected by the seasonal event. The goodwill for Company C is higher than Company D of about 6.1%, this may be due to the Company C is a national brewer of mass market consumer beers sold under a variety of brand names, so the Company C can match with the first described company.
The fixed asset turnover for Company C and Company D is 1.72x and 12.67x respectively. This is because Company C has many fixed asset, and own a number of beer related business and several major theme park where the total fixed asset recorded 51.2% of its total assets.
Company C has high total debt/total asset ratio and long term debt / shareholders’ which were 51.19% and 310.28% respectively, while Company D has zero for both ratios. This show company D was using very conservative strategy which was low debt and high reservation strategy to manage the company and the Company C was using very aggressive approach in the risk management to earn more profit.
In conclusion, the company fit the first set of description which is
Beer
Company D has higher current ratio and quick ratio which is higher 2.43x and 2.3x respectively. This was because Company D had higher cash and short term investment which was 55.6% while Company C only has 1.4%. It proves that Company D is financially conservative and it matches with the second described company.
Beside that, Company D keep more stock which is 11.9% compare with Company C 4.3% because their company produces seasonal and year round beers with smaller production volume and their beers’ demand is not whole year long. Hence slower sales in Company D will have lower inventory turnover with higher inventory.
There was no dividend payout for Company D whereas the Company C they have high dividend payout ratio due to stable product sales which not affected by the seasonal event. The goodwill for Company C is higher than Company D of about 6.1%, this may be due to the Company C is a national brewer of mass market consumer beers sold under a variety of brand names, so the Company C can match with the first described company.
The fixed asset turnover for Company C and Company D is 1.72x and 12.67x respectively. This is because Company C has many fixed asset, and own a number of beer related business and several major theme park where the total fixed asset recorded 51.2% of its total assets.
Company C has high total debt/total asset ratio and long term debt / shareholders’ which were 51.19% and 310.28% respectively, while Company D has zero for both ratios. This show company D was using very conservative strategy which was low debt and high reservation strategy to manage the company and the Company C was using very aggressive approach in the risk management to earn more profit.
In conclusion, the company fit the first set of description which is