EMPRESAS NO IDENTIFICADAS 2006

RESPUESTAS PARA CASO DE EMPRESAS NO IDENTIFICADAS 2006

1. Advertising Agency –E

        We believe the matching industry is Company E. As a service firm it does not contain inventory. It will also have zero inventory turnover. Through research we learned that the media purchase is made on behalf of the client which means that the accounts receivable and accounts payable would be roughly equal to one another. In addition, the receivable collection period (RCP) is greater than 30 days which is common in business to business firms. Also, the firm has a low debt to asset ratio and this is again because the advertising agency industry has no inventory.

1. Airline Industry-M

We feel like industry M best suits this industry. Similar to the advertising industry the Airline industry the airline industry is also a service industry. Meaning the level of inventory is also zero. More importantly however, this industry’s main assets include fleets of airplanes and this will reflect a high plant and equipment percentage. The receivables collection period (days) for industry M is 12, because in this service industry the receivables collection period is short this. Also, most of the sales are processed quickly many in cash therefore their account receivables will also reflect a low number. For this reason we feel that letter M fits the description for the airline industry.

1. Bookstore Chain-B

The matching industry is B.  Bookstore chains are part of the retail market and their plant and equipment is relatively high. Also, the inventory of the book store is relatively high. Another indication that letter B corresponds with the bookstore chain is that if we take a look at the inventory turnover, which can be found by dividing the cost of goods sold over inventory, this helps indicate how often the company sells and replaces the inventory. Because books are not everyday items nor are they perishable one can observe that the accounts receivable is low.

1. Commercial Banks-N

We believe the matching industry is letter N. Commercial banks are also in the service industry and therefore they have no or very little inventory. Banks operate by using other people’s money or deposits. Therefore, commercial banks have very high accounts receivables from the interest payments it receives when they make loans to its customers. Another observation is that commercial banks also have high number of notes payable, this is due to the loan contracts they have engaged in. If one calculates the total debt/total assets ratio one can observe that this number very high at .88. Which means that this bank is highly leveraged and thus profitable but this particular set up also creates an insolvency risk.

1. Computer Software Developer-D

Firms involved in the creation of software development tend to have no preferred stock and only common stock. Industry D’s financial data reflect such case. This industry tends to finance their projects by issuing stocks rather than invest in long-term debt. The case might also be that since many of the software companies are not well established obtaining a loan might seem difficult. In addition, computer software companies tend to generate their revenue by selling their products online as a result their receivable collection periods tend to be high. Industry D’s financial statement reports 68 days for collections

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