The Financial Detective
1. EXAMINE & ANALYZE THE FINANCIAL RATIOS FOR EIGHT PAIRS OF UNIDENTIFIED COMPANIES
A) Health Products
From the market data, the beta of company B is slightly higher than company A. Company A appears to be less risky than company B. It is likely because company A is a diversified health-products company. Since it manufactures various products and involves in different segments, risk could be reduced.
The liquidity ratios show that both companies A and B might not face liquidity problem. Current ratio and quick ratio of company A are higher than company B. Company A holds more current asset in term of cash and short term investments. These cash and short term investments can be used to invest in the future.
In terms of asset management, company A has a higher inventory turnover than company B. This is probably due to the mass-market-oriented strategy adopted by company A. In this strategy, activities of buying and selling of inventories are done frequently. The more frequent stocks are being bought and sold, the higher the inventory turnover. Moreover, company A focuses on brand development and management. It is believed that another reason for the higher inventory turnover is likely due to the efficient stock management practiced by company A.
Debt management ratios reveal that company B uses more debt in financing than company A. It is due to company B needs more capital for the research and development budget.
From the view point of DuPont analysis, asset turnover of company B is lower than company A. According to the company description, company B has divested several of its business. Thus, its total assets decreased and use lesser assets to generate sales.
B) Beer
According to the ratios given, it shows that Company C exposed in lower risk than Company D does which shown in the beta level, this might due to the seasonal production of Company D which heavily rely on the sales volume during that particular seasonal period. Besides that, from the asset
A) Health Products
From the market data, the beta of company B is slightly higher than company A. Company A appears to be less risky than company B. It is likely because company A is a diversified health-products company. Since it manufactures various products and involves in different segments, risk could be reduced.
The liquidity ratios show that both companies A and B might not face liquidity problem. Current ratio and quick ratio of company A are higher than company B. Company A holds more current asset in term of cash and short term investments. These cash and short term investments can be used to invest in the future.
In terms of asset management, company A has a higher inventory turnover than company B. This is probably due to the mass-market-oriented strategy adopted by company A. In this strategy, activities of buying and selling of inventories are done frequently. The more frequent stocks are being bought and sold, the higher the inventory turnover. Moreover, company A focuses on brand development and management. It is believed that another reason for the higher inventory turnover is likely due to the efficient stock management practiced by company A.
Debt management ratios reveal that company B uses more debt in financing than company A. It is due to company B needs more capital for the research and development budget.
From the view point of DuPont analysis, asset turnover of company B is lower than company A. According to the company description, company B has divested several of its business. Thus, its total assets decreased and use lesser assets to generate sales.
B) Beer
According to the ratios given, it shows that Company C exposed in lower risk than Company D does which shown in the beta level, this might due to the seasonal production of Company D which heavily rely on the sales volume during that particular seasonal period. Besides that, from the asset