Diane Lipana FInancial Detective HW

HEALTHPRODUCTS Character: Character: Develops,manufactures& Manufacturesandnationally distributesethicaldrugs marketsabroadlineofOTCP, Soldtodoctorsandhospital name‐brandtoiletries,& throughdirectagents consumerbabycareproducts Holdssubstantialnumberof Productsaresoldtoretailers& patentsonoriginalresearch distributors Strategyintappingresearch Retailersanddistributors breakthroughs:ownssharesin directlyselltoconsumers JVandbiotechfirms Mass‐marketstrategy:brand developmentandmanagement •

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Answer:B

Answer:A

Basis:

Basis:Massproduction,thus HigherinventoryTO HighassetTO Highcurrentassets(dueto inventoryandAR)

Highotherassets:dueto patents Highprofitmargin:since breakthroughdrugs Highdebttoequity:highLT debtsinordertofundR&Dfor breakthroughs HOUSEHOLDAPPLIANCES Character: Character: Manufacturingandmarketing Attemptstosegmentthemarket highqualityhomeappliances forthesameproduct.HOW?: Carriesitsownbrand owning3private‐labelbrand Strategy:industryqualityleader names &chargescommensurateprices Captivesupplierofprivate‐label appliancesonalargemulti‐year contractwithaleadingUS retailer •

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Answer:D

Answer:C

Basis:

Basis:

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Lowcashsincemostfundsare divertedtofixedassetto supportstrategy Highshorttermliabilitiesto supportoperationofhigh qualitygoods HigherSG&A,EBIT Beingaqualityleadermay implylengthinthebusinessand efficiencyinproduction resultingtolowdebttoequity ratio Higherprofitmargin:quality productscandemandhigher prices

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Lowprofitmargin,lowEBITis sacrificedforhighsalesTO Highercash:duetoprivatelabel supplieragreementswithmulti‐ streamingsales yearcontract  andcash LowerSG&A:impactofbeinga captivesupplier

COMPUTERS Character: Character: Mail‐ordersellerofPC Sellscomputersthroughdealers PCtotheconsumermarket andasalesforce Locatedinmodestfacilityina Mostcompanysales:business ruralregion market •

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Lipana,DianeShayneD. LegalAccounting‐Atty.Kho‐Sy Page 1 of 4

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Outsourcesimportantelements ofmanufacturing Keystrategy:lowcost,lower pricesandhighersalesvolume

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Leadingbrandname Moreinternalmanufacturing Keystrategy:qualityand serviceleaderintheindustry& broadproductlineinits segment

Answer:E

Answer:F

Basis:

Basis:

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LowerCGSandhigherGPM, becauseofoutsourcing

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higherCGSbecausemore internalmanufacturing lowerSG&A:duetoefficient distributionsthroughdealers andsalesforce higherinventoryTO:since businessmarket,bulk sales/multipleunitsalesina singletransaction

RETAILING Character: Character: Large,nationalchainof Growingchainofconsumer departmentstores home‐improvementstore Sellslargelyoncredit offeringalargescaleselection Sellsfromautomotive ofhome‐improvementitemsat equipmentandservicesto lowprices clothingandHHitems Categorykiller Propertiesareprimarilyleased Strategy:underprice competition,advertise heavilyenjoylargemarket shareandunitsalesvolumes Storesareinawarehouse formatandareallleased •

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Answer:G

Answer:H

Basis:

Basis:

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HighAR:creditsales LowerFA:propertiesare primarilyleased

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Higherinventory Higherfixedasset HigherReceivablesTO HigherassetTO

HOTELS Character: Character: Ownsoneofthelargestfood‐ Operatesworldwidechainof servicecontractorsinthe high‐qualityhotels/motelsin country additiontoasmallerlineof Financeshotelsviaoff‐balance‐ casinos sheetlimitedpartnerships. Keystrategy:concentrateonthe Hassignificantassestinthe lodgingandentertainment formoffood‐serviceandhotel‐ businessandownitsown managementcontracts properties Keystrategy:manage,notown, itshotels •

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Answer:J

Answer:I

Basis:

Basis: Lipana,DianeShayneD. LegalAccounting‐Atty.Kho‐Sy Page 2 of 4

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Lowfixedasset HigherSG&A HighAR,lowCash LowerCGS,higherGP Higherfixedassetturnover: duekeystrategyandnatureof assets

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Highfixedasset LowInventory HigherCGS HigherLTliabilitiesbecauseof natureofassets/investments NIandprofitmarginduetothe qualityofgoodsandservices offered

NEWSPAPERS Character: Character: Hasalargeflagshipnewspaper ownsanumberofnewspapers Papersoldaroundthecountry inarelativelysmaller andtheworld communitiesthroughoutthe Product,centeredlargelytoone Midwest Strongcentralcontrol viewedbyanalystsas:holdinga Competitionforsubscribers portfolioofasmalllocal andadvertisingrevenue:fierce monopoliesinnewspaper inthechosensegment publishing hassignificantamountof goodwillonB/Sstemmingfrom acquisition keytooperatingsuccess: strategyofdecentralized decisionmakingand administration •

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Answer:L

Answer:K

Basis:

Basis:

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higherfixedassetsdueto magnitudeofoperationand distribution higherinventoryturnover:size ofdistribution(localand abroad)

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higherotherassets:goodwill higherIncome(EBIT,Pretax,NI) andhigherProfitMargin: capturedlocalmarket, monopoly highercurrentliabilitiesdueto highSTliabilitiesduetonature ofoperation:decentralized (moreemployees,moreoffices leasedoroperated)

BEER Character: Character: nationalbrewerofmassmarket microbrewer beers smallerproductionvolumeand varietyofbrandnames higherprices ownsseveralthemeparks companyoutsourcesmuchofits brewingactivity recentlycompletesasuccessful IPOofstock •

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Answer:M

Answer:N

Basis:

Basis:

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higherfixedassets:big operation higherotherassets:ownership ofthemeparks higherLTdebtsandotherliab: duetosizeofoperation

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higherPEratio:IPO higherequitythanliabilities, higherassetTOandROA,lower CGS:outsourcingofbrewing activities higherGP:smallvolume,high Lipana,DianeShayneD. LegalAccounting‐Atty.Kho‐Sy Page 3 of 4

higherCGS pricesspecialtyitemvmass higherEBIT:massmarket item higherLTdebttoequity:sizeof higherSGA:specialtymarket operation STEEL Character: Character: minimill largeintegratedsteelproducer servesaspecificsegmentofthe abletoprovideafullrangeof steelmarketandnotvulnerable products. toforeigncompetition Highercostmainlylabor smallerinscale:canfillsmaller Highcostoffsetwithlong productionordersprofitably productionrunsinthe notunionizedlowlaborcost fulfillmentoflargecontracts keystrategy:lowcost,low price,nimbleservice • • •

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Answer:O

Answer:P

Basis:

Basis:

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lowerprofitmargin:lowcost /priceCreated by Diane Shaynestrategy higherSG&A:specialtymarket

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Higherfixedassets:large operation,longrangeof products Highassetturnover:high volumeofsaleforlarge contracts

PerIndustry Appliances,Computers,Retail,SteelhavehighCGSsincetheyinvolved manufacturingwhichentailshugecostformachineriesorsourcingofmaterialsand labor. Hotelshavehighinventoryturnoversincetheirinventoriesareinthenatureofofg ofgoodsinvolvingconsumables. HighLTDebttoequityandhighliability,andCGSforHotelandAppliancesbecause ofthenatureoftheirinvestments,whichdemandshighcapitaloutlay:buildingsfor HotelsandequipmentforAppliancesmanufacturing. HealthhavehighSG&Apossiblyduetoexpensesrelatedtoadvertisingand employmentofmedicalrepresentativeswhodoesdirectsalesandmarketingof goods. ComputersandRetailinghavehighcurrentassetsduetotheinventorykept. Computers,althoughnotsellingconsumableslikeinretail,havebecomeapriority iteminhouseholdsandoffices. Healthhasahighprofitmarginduetothenatureofthegoodssold.Medicinesare bothnecessarygoodsandconsumables. Beeralsohasahighprofitmargin.Beingasingood,evenifpriceincrease,its consumermarketwillcontinuetopatronize.Theyareingoodpositiontodemand forhigherpricesandgainhighermargins. HealthandHotelhaveahighPEratio,possiblybecausethereisahighexpectationof growthforsuchindustries.Forhotels,thereisapossibilityofatourismboom.For health,therecouldexpectationofreleaseofbreakthroughmedicines.

Lipana,DianeShayneD. LegalAccounting‐Atty.Kho‐Sy Page 4 of 4