Name : Haroon Khan

Program : MBA (1.5 year)

Section : D (Evening)

Subject : Case Studies in Finance

THE CASE OF THE UNIDENTIFIED

INDUSTRIES-1995
Summary:

The aim of this case study is to understand the balance sheet of a

company. The whole case is consist of eleven company with some clues
and their unknown balance sheets which is A, B, C, D, E, F, G, H, I, J
and K. The main purpose of this case is to find out and match the
company with the provided balance sheet by giving a strong argument.
So the companies with the desired and match balance sheet are the
following:

1. Firm A; Commercial Bank :

As the main function of the bank is lends money to customer and

also collects money from customers so Firm A is a a Commercial bank
because it has no inventory or zero inventory and secondly a high
account receivables, which is 85%. The account payable is also high
which need for a bank that is 62% is. Therefore it has a high account
receivable and a high account payable.

2. Firm B; Advertising Agency:

As advertising firm deal with customer on credit bases and after

completion of task the customer paid money to the company. So on the
bases of such, the firm B is Advertising Agency because it has zero
inventory turnovers and secondly it has a high level of account
receivable and a high account payable, which is 55% and 63%
respectively..

3. Firm C; Electric and Gas Utility :

The company Electric and gas utility is firm C because the biggest
indicator in such case is that the firm has a large plant and equipment
which is 77%. And in Electricity and Gas Utility Firm, there is a little
need of inventory and hence in this case the inventory is 1% too. On the
other hand the company has high portion of long debt which is 29%, and
normally long term debt is used to fulfill the expenses.

4. Firm D; Departmental Store Chain:

Departmental Store Chain is firm D because it is a non-

manufacturing firm, so cost of goods sold of the said firm consist of only
for purchases. The firm has high inventory and high portion of debt
which is 24% and 38% respectively. To make purchase the firm goes for
loan. The departmental store has a large plant and equipment which is
55% in this case.

5. Firm E; Retail Drug Chain :

The retail drug chain business is normally based on sole

proprietorship so it mean there is no need of long term debt for financing
which is 0%.The firm has large number of inventory which is 43%
because pharmaceutical firm kept it for emergency purposes. Its retain
earning is also very high which is 51%, it mean that the firm using their
fixed asset vey efficiently.

6. Firm F; Airline:

The airline has zero inventory which mean that the business of
airline is based on long term so they made a huge amount of their
investment in fixed asset. This firm is no concern with short term
investment because its business has for long period of time. The airline
need to have a large plant and equipment which is 71% in this balance
sheet.

7. Firm G; Retail Grocery Chain :

 Retail grocery stores mostly have a large amount of inventory
(22%) for this purpose it need high amount of loan which is 29%. The
retail store kept high inventory to display their goods to customers. It has
low level of cash (4%) because it reinvests it in the form of buying more
products in order to fulfill the customer need and wants.

8. Firm H; Health Maintenance Organization :

The Health care organization is firm H because health

organization mostly doing their businesses on cash, in this case it has a
large portion of cash which is 77%. The health organization provides
medication to people, and collects cash in return when the task ends.
This firm uses no debt for financing and it has no inventory. The firm
pays their short term liability from the cash received from customers. Its
retain earning is also high which is 51%.

9. Firm I; Meat Packer:

The firm meat packer is firm I because it made a single product

like meat and distributes it to their customers, the inventory level for
meat packing is 13% which is suitable in this case. it required plant and
equipment for packing meat so in this case it has 35%(plant &
equipment). The firm collects money after delivery of products so it also
has retail earning of 18%.
 10. Firm J; Software Developer:

Software developer is company J because software development

is fully based on software programs and there is no need of debt for
further financing, the developer makes a few changes in the current
program and after that they launch it in the market. In case of J the firm
has a high portion of cash that is 67%, because it directly collects money
from their customers.

11. Firm K; Pharmaceutical Manufacturing :

The manufacturing firm deals with production of some product by

getting inputs, process that inputs and form outputs. The company
actually creates value for their product so it depend on how efficiently
and effectively firm uses their resources to make revenue. For
manufacturing company like pharmaceutical a large plant and equipment
is needed which is 48% in case of k. its profit margin is high which is
10.6%, which show that pharmaceutical firm uses their fixed assets
efficiently. It reatain earning are also high which is 46%.