SIMON GRADUATE SCHOOL OF BUSINESS

Common-Size Financial Statements and Related Analysis

ACC 411 Assignment 1
1/16/2012

SUBMITTED BY Bhadra Menon Sanjeev Prakash Sanchit Sarin Venkat P Sastry Susarla

Question 1
Industry Commercial Airlines Commercial Banking Computer Software Integrated Oil and Gas IT Service Provider Liquor Producer and Distributor Mobile Phone Service Provider Pharmaceutical Preparations Retail Grocery Stores Semiconductor Manufacturer Exhibit Sno: 10 2 8 4 5 3 9 6 1 7

Reasons y Taking a glance at R&D expenses, only Exhibits 6, 7 and 8 have significant R&D expenses. Among the three, 8 has highest cash and marketable securities, lowest PP&E, no debt and lower inventory days. It is also the most profitable of the lot (NI/Sales). Its intangibles can be due to patents. Among 6 & 7, inventory days for 7 are higher. Drugs have lesser days in the inventory due to shorter shelf period. Hence, 6 has to be pharmaceutical firms with high COGS, high intangibles and high PP&E. so semiconductor is Exhibit 7 Banks have high Accounts Payable, higher Days Receivable, higher Notes Payable and high leverage. Considering all these points, Bank has to be exhibit 2. Commercial Airlines and Retail Grocery Stores have lower Net Income (NI). Exhibits 1 and 10 are the ones with lower NI. Both have high SG&A, but airlines would have more staff and administrative costs. Again, stores would have higher days inventory in comparison to airlines. Stores will have lower days receivable. So, exhibit 1 will be stores and exhibit 10 airlines. Days in inventory for liquor have to be the highest, as the value of alcohol depends on the fermentation time. Therefore, Exhibit 3 with the highest inventory days has to be Liquor manufacturer. Now with Exhibits 4, 5 and 9 left, we look at the PP&E , raw materials and finished goods and this is lowest in Exhibit 5. Again, Exhibit 5 has no long term debt, no accounts payable and high cash. Therefore, exhibit 5 is IT service provider. Between mobile phone service provider and Oil & Gas, PP&E for Oil & Gas would be higher. Accumulated Depreciation would also be higher. R&D Expenditure is higher for Oil & Gas, due to the exploration costs .The interest coverage ratio is higher for Oil & Gas, as it is more profitable .So Exhibit 4 is Oil & Gas, and Exhibit 9 is Mobile Service Provider.

y y

Question 2
Industry Electric Utility Japanese Trading Company Aerospace Manufacturer Automobile Manufacturer Supermarket Chain Exhibit Sno: B D A E C

y y

y y

Exhibit C has the lowest accounts receivable and lowest collection period. It has high inventory too. Therefore, it is the supermarket chain. Electric Utility Company will have highest PP&E among the group and its inventory would be low. It would also be highly profitable due to its monopoly in the market. Therefore, Exhibit B is the Electric Utility. Due to the high receivables, lowest PP&E and highest inventory turnover, Exhibit D has to be the Japanese trading company. In Aerospace manufacturer, products are made to order, whereas products are kept in the inventory for Automobile manufacturer. Therefore, inventory would be high for Automobile manufacturer and inventory turnover would be lower for Automobile manufacturer. So Exhibit E is Automobile Manufacturer.