Financial Detective Persuasive Essay

Company A is most likely Johnson & Johnson, while company B is probably Pfizer. The reading mentions that they have a large over-the-counter section which would make sense considering Johnson & Johnson are known for their over-the-counter pharmaceuticals. Company B is probably Pfizer because they are known for high research and development costs and offering various prescription drugs. The Beta for Pfizer is .85, and as a measure of volatile risk this makes sense because of high research and development costs for new pharmaceutical drugs. I believe that Company C is Paragraph 1, which is Anheuser-Busch.

This would fit the description that the firm owns “a number of beer related businesses, such as snack and aluminum container manufacturing and several major theme parks.” Company D is paragraph 2 and it is uncertain which firm this it. It is definitely most likely a smaller IPO style type of Brewery which can be reflected in 16 on net fixed assets. Paragraph 2 is most likely Company E. This company is most likely Apple because they mention a compelling founder which might very well be Steve Jobs. Also, the net profit margin and turn over ratio are very high which would accurately reflect Apple’s recent success.

Company F is most likely the first paragraph and probably Dell Corporation. This is because of “built-to-order” PCs, which sounds like Dells business strategy. This strategy also allows Dell to have a high inventory turnover and keep smaller amount of inventories on hand. Paragraph two is most likely Company G which is probably Amazon.com. Amazon.com became profitable in 2004 and because this assignment was created in 2005 it makes sense when it says “The firm has only recently become profitable.” Company H is most likely paragraph 1 and probably Barnes and noble. This is because Barnes and Noble would need more inventories on hand which would go hand-in-hand with the large inventory percentage. Company I is most likely paragraph 2 which may refer to Wausau Paper. Wausau paper seems to be describes when they say “The other firm is a small producer of printing, writing, and technical specialty papers, as well as towel and tissue products.”

Company J is Paragraph 1, which I believe is Weyerhaeuser Company Limited, because Weyerhaeuser fits the description of “One company is the world’s largest maker of paper, paperboard, and packaging.” They are also one of the largest private owners of timberland in the world which could be the reason why they have large current asset and net fixed asset ratio. Company K is most likely paragraph 1. Because it is less specialized, it would have a smaller Gross profit margin that paragraph 2. Also, it would have higher liabilities at 71.8 compared to 51.5 for paragraph 2. Company L is most likely paragraph 2 because the lower liabilities and higher gross profit margin are indicative of a company that is more specialized. I believe that company M is paragraph 1, which is Costco. Costco fits the description of “The company is known for its low prices, breadth of merchandise, and volume-oriented strategy.”

Net fixed assets would be substantial, as indicated by the data at 57% because of its large and expanding network of distribution centers and stores. I believe company N is the second paragraph and is the company Target. Target fits the description of an upscale discount chain. Target issues credit to qualified customers, which could explain the 17% of total assets. I believe Company O is the second Paragraph, which is Lee Enterprises. Intangibles make up a large percentage of total assets, which would explain the significant amount of goodwill. The company also has low SG&A expenses which is probably because of its decentralization policy. I believe paragraph one is Company P, which is the New York Times. The companies’ high SG&A expenses are indicative of how it’s a diversified media company and does business around the world.

Analysis

Health Products

Company A is most likely Johnson & Johnson, while company B is probably Pfizer. The reading mentions that they have a large over-the-counter section which would make sense considering Johnson & Johnson are known for their over-the-counter pharmaceuticals. They are shipped around the world to many distributors in massive quantities. The cost of goods for Johnson and Johnson 23.9 which is significantly larger than Pfizers. This could be because Johnson and Johnson makes many different products and they are made of numerous constituents. Johnson & Johnson manufactures large amounts of goods that they know they’re going to turnover because people are going to purchase them quicker and there is a steady and consistent demand for them.

This would make the turnover ratio for Johnson and Johnson 3.08 make sense compared to the lesser turnover ratio of .93 for Pfizer. Johnson and Johnson would also more likely have more manufacturing facilities because of their diverse array of goods. Also unlike Pfizer, Johnson & Johnson did not get rid of a large part of their non-pharmaceutical goods, so it would make sense that the net fixed assets are larger with Johnson and Johnson

Company B

Company B is probably Pfizer because they are known for high research and development costs and offering various prescription drugs. The Beta for Pfizer is .85, and as a measure of volatile risk this makes sense because of high research and development costs for new pharmaceutical drugs. Also Pfizer would have high intangibles at 46% of assets due to the aforementioned large research and development budget. Pfizer is not very liquid which would give it a low current assets ratio. It does not have much cash because the budget is put into R&D.

Because high research and development is spent on research and development, the price of pharmaceuticals are high. However, Pfizer’s actual production isn’t very expensive which would make Pfizer’s cost of goods sold low relative to the Johnson & Johnson. High Research and development would also cause high amounts of debt incurred and the total debt to total assets ratio would also be higher.

Beer
Company C

I believe that Company C is Paragraph 1, which is Anheuser-Busch. This would fit the description that the firm owns “a number of beer related businesses, such as snack and aluminum container manufacturing and several major theme parks.” This would also account for the large percentage of fixed assets which is nearly 54.7 percent. Also their cost of goods sold would be higher at 53.9, than the other company because of the expensive marketing implementation strategies Anheuser-Busch has.

Company D

Company D is paragraph 2 and it is uncertain which firm this it. It is definitely most likely a smaller IPO style type of Brewery which can be reflected in 16 on net fixed assets. Also they have much fewer liabilities at .7 (compared to 9.5 for Anheuser) because they are smaller and have less things to pay out.

Computers
Company E

Paragraph 2 is most likely Company E. This company is most likely Apple
because they mention a compelling founder which might very well be Steve Jobs. Also, the net profit margin and turn over ratio are very high which would accurately reflect Apple’s recent success. Also, the retail strategy described as “aggressive” and “meant to drive traffic through its stores and to expand its installed base of customers by showcasing its products in a user-friendly retail atmosphere” seems like it is very Apple-esque.

Company F is most likely the first paragraph and probably Dell Corporation. This is because of “built-to-order” PCs, which sounds like Dells business strategy. This strategy also allows Dell to have a high inventory turnover and keep smaller amount of inventories on hand. In turn, this style of business should technically speaking allow for more liquid. Dell would also possess high liquidity which would reflect the current and quick ratios to be high as seen on the Common-Sized Financial Data and Ratios chart.

Books and Music
Company G

Paragraph two is most likely Company G which is probably Amazon.com. Amazon.com became profitable in 2004 and because this assignment was created in 2005 it makes sense when it says “The firm has only recently become profitable.” Usually online manufacturers have high-turnover ratios to compensate for enhanced competition in the marketplace, which would make sense as to why Company G’s asset turnover is low.

Also inventory should be relatively low because they are an online company and everything is ordered and shipped in a relatively quick fashion. Because they don’t actually manufacture anything (except the kindle) and they’re competitive edge is extremely low pricing, they probably have low profit margins, as the data indicates. The high debt to asset ratio of 59.94 is also indicative of a company that is highly leveraged. As aforementioned, Amazon just recently became profitable, and they borrowed a lot to repay for facilities and other expenses. Do to limited income they did incur a lot of debt so this would make sense.

Company H

Company H is most likely paragraph 1 and probably Barnes and noble. This is because Barnes and Noble would need more inventories on hand which would go hand-in-hand with the large inventory percentage. They need a lot of books in stock and more on hand in the stores and warehouses than an online retailer would need. Also the low profit margin is indicative of a company like Barnes and Noble because they pay full price on shipping and storage costs since they are a standard retailer, thus minimizing profits.

Paper Products
Company I

Company I is most likely paragraph 2 which may refer to Wausau Paper. Wausau paper seems to be describes when they say “The other firm is a small producer of printing, writing, and technical specialty papers, as well as towel and tissue products.” Wausau being a smaller company would have much lower inventories percentage than company J, which is indicated by the data. Also Wausau owns very little timberland which causes them to purchase their wood fiber on the open market. This could explain why they have a lower fixed asset percentage. Because their wood is purchased on the open market, they would have higher long-term debt and liabilities.

Company J

Company J is Paragraph 1, which I believe is Weyerhaeuser Company Limited, because Weyerhaeuser fits the description of “One company is the world’s largest maker of paper, paperboard, and packaging.” They are also one of the largest private owners of timberland in the world which could be the reason why they have large current asset and net fixed asset ratio. Also, a company like Weyerhaeuser would have a large amount of fixed assets indicated by the large fixed asset ratio, because of substantial timberland ownership. Also, because they are a huge firm, and have a lot of paper products on hand, it makes sense that they have a large amount of current assets.

Tools

Company K is most likely paragraph 1. Because it is less specialized, it would have a smaller Gross profit margin that paragraph 2. Also, it would have higher liabilities at 71.8 compared to 51.5 for paragraph 2. Company L is most likely paragraph 2 because the lower liabilities and higher gross profit margin are indicative of a company that is more specialized.

Retailers
Company M

I believe that company M is paragraph 1, which is Costco. Costco fits the description of “The company is known for its low prices, breadth of merchandise, and volume-oriented strategy.” Net fixed assets would be substantial, as indicated by the data at 57% because of its large and expanding network of distribution centers and stores. Because the company has a volume oriented strategy, with large quantities of stock and customers, it would have a larger turnover of 7.69 comparative to the company in paragraph 2, which has a turnover ratio of 5.86. Many customers pay with credit at Costco, with members paying with their Costco card, which would explain the very high Receivables turnover at 192.73. Because Costco is focused on Mass selling they also have a low quick ratio of .17.

Company N

I believe company N is the second paragraph and is the company Target. Target fits the description of an upscale discount chain. Target issues credit to qualified customers, which could explain the 17% of total assets. Target comparative to Costco has a higher current assets ratio, which is 1.69. This is because Target has many current assets to cover its current liabilities.

Newspapers
Company O

I believe Company O is the second Paragraph, which is Lee Enterprises. Intangibles make up a large percentage of total assets, which would explain the significant amount of goodwill. The company also has low SG&A expenses which is probably because of its decentralization policy. Local branches also allow for personal connections with their customers, which would give it a higher turnover rate. Small town newspapers don’t have much competition, and therefore don’t have to lower their prices or spend a lot on marketing. Therefore, the company’s net profit margin would be relatively high.

Company P

I believe paragraph one is Company P, which is the New York Times. The companies’ high SG&A expenses are indicative of how it’s a diversified media company and does business around the world. The New York Times has a lot of competition and therefore has to keep prices low. This is shown in the relatively lower net profit margin. Also, The New York Times constructed new headquarters in 2005 which is shown on the financials through the high percentage of net fixed assets on the common-sized balance sheet.

Cite this Page

Financial Detective Persuasive Essay. (2016, Aug 20). Retrieved from https://phdessay.com/financial-detective/

copy to clipboard