Drivers of Industry Financial Structure and Be our guest

Relative Values of Securities Assignment Weishu Guo Drivers Drivers of Industry Financial Structure St ructure J. Development of prepackaged prepackaged software

Investment in innovation is extremely important in software industry. So the R&D/Sales is high. And their products are actually technology, so there is no inventory and gross margin is very high, which is close to 91%.

All facilities they need are an office building and

computers. The net plant& equipment is low. A .On-line retailer

Receivables are zero because individuals pay cash or credit card when they are shopping online. Receivables are negligible for on- line retailers. D. Major passenger airline

The net plant & equipment is high because Major passenger airlines have many planes as their major assets to carry passengers and make profits. The unearned revenue is high because people usually book their tickets and pay before th ey complete their journey. C. International hotel chain

International hotel chain mainly provides services and rooms for people, so the inventory is very low and negligible. And money is collected from credit cards after people leave the hotel, so there is no unearned revenue. The major assets are buildings, so the net plant& equipment is high. I.Temporary staffing agency

A staffing agency is a service that matches the labor needs of their corporate clients with individuals who have the skill sets necessary to meet those needs. Since it is a service industry, industry, there is no inventory. inventory. And investment is R&D is not necessary. necessary. B. Supermarket grocery retailer v.s. H. Warehouse club for food and general merchandise

They are very similar industry with high net plant &equipment and zero unearned revenue, but the inventory is higher for warehouse club because they keep wholesale quantities of  products. Compared with supermarket grocery retailers, their gross margin is lower but net profit margin is higher. higher. F. Pharmaceutical company V.S. G. Manufacturer of electronic communications equipment

Although the common size financial balance sheets of pharmaceutical company and Manufacturer of electronic communications equipment have many similarities in long days of  receivables, investment in R&D and net plant & equipment, the net income/sales is much higher is in pharmaceutical company. E. Manufacturer and marketer of consumer products

The days of receivable are long because retailers often pay to manufacturer after they sell products and return excessive products. For manufacturer, investment in net plant & equipment is ne cessary. cessary.

Be Our Guest. Inc. The key success factors: The key success factors in the equipment rental business are quality of service. First, this company invested in more elegant inventory and maintained their inventory quality. Second, the facility was organized with speed and accuracy in mind in order to maintain its delivery efficiency. Third, it insisted its rapid turnover strategy and competed in the market on quality of service and inventory, not on low price. How the company performed over past years: There is great seasonality in its business. From its quarterly income income statement, its annual net earning mainly happened in second quarter and in the first quarter, the company opened at a loss. And from the quarterly quarter ly balance sheet, the company c ompany was short of cash in the fourth quarter and accounts receivable ballooned because business was booming at that time.

year

1994

1995

1996 1996

1997 1997

Gross margin

0.5911

0.5393

0.5710

0.5959

Profit margin

0.0866

0.0634

0.0554

0.0356

From the income statement, we can calculat e that from 1994 to 1997, 1997, gross margin didn¶t growing much and net profit margin declined dramatically because of the rising general and administrative salaries. It reflects than the company did badly in cost control.