The Financial Detective 2005 Case Study

Product Overview

The case presents the student with financial ratios for eight pairs of unidentified companies and asks them to mate the description of the company with the financial profile derived from the ratios. The primary objective of this case is to introduce students to financial ratio analysis?in particular, the range of ratios and the insights each one affords. This case presumes that students have already been introduced to the definitions of various financial ratios through other readings or lectures. The structured exploration of pairs of companies within an industry affords a number of important insights into strategy and financial performance. First, the economics of individual industries account for significant variations in financial ratios because of differences in technologies, product characteristics, or competitive structures. Second, financial performance results from managerial choices: within industries, the wide variation in financial ratios is often a result of the differences in corporate strategy in marketing, operations, and finance. For those reasons, this case is a good springboard into subsequent classes, which deal with the interaction of strategy and financial performance.

Case 6 - The Financial Detective Essay

947 WordsSep 13th, 20144 Pages

Week 1: Case 6 “The Financial Detective”

From the case study of The Financial Detective, 2005 the objective is to place the correct company to match the given financial data and ratios. I will analyze and compare the financial ratios of the companies in each industry and interpret them to identify the correct company.
Health Products:
Company A is Johnson and Johnson (J&J) as it is evident based on its financials. The cost of goods sold is twice as higher as Company B because J&J has a very broad range of products that would require many different resources and suppliers. J&J has a high inventory and receivables turnover mainly because it is reflecting its mass-marketing strategy. Also because J&J mass markets its broad line of…show more content…

Computers:
Company E is Dell, clearly because they exclusively do mail-order and built-to-order PCs allowing its customers to design their own products. Due to their strategy in passing on the cost savings to the customers, they have lower SG&A as compared to Company F. However, Dell purchases many of its products manufactured by its many suppliers which is why they have a high accounts payable.
Company F is Apple as it has a higher Beta than Dell due to its dramatic decline in market share making it more risky than the rest of the market. The company is led by its charismatic founder, Steve Jobs, and is one of the highest competitors in the market because of its innovative products and retail store presence.
Books and Music:
Company G is Amazon based on its online presence description. Amazon’s net profit margin is high because sells to customers through its vast retail presence that offers a variety of merchandise with discounts which has helped them earn higher profits. Their inventories are lower because their strategy is to keep low inventory to reduce the possibility of risk due to new product launches, changes in customer preferences, etc. Their beta is significantly higher because they haven’t been around as long as Company H.
Company H is Barnes and Noble and because of their presence in retail stores, they have a higher net fixed assets and higher inventories because they must keep

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