w HARVARD/| BUSINESS |SCHOOL 9-207-096 ‘REV: APRIL 10, 2008, WILLIAM E. FRUHAN, 1. The Case of the Unidentified Industries—2006 If you were asked to visualize (in income statement and balance sheet form) the financial structure of a typical firm in one particular industry, do you think you could do it? How close to your “vision” do you think the “reality” would be? What if you were asked to do the same experiment covering 14 firms drawn from 14 different industries? How many of the 14 do you think you would get right? ‘You may be surprised by how much you already know! Exhibit 1 presents the balance sheets (in percentage form) and other selected financial data for 14 firms drawn from 14 different industries. While there are clear differences in the financial structures of different firms within a single industry, the firms selected have figures that are broadly typical of those in their industry. ‘Try to match the 14 firms operating in the 14 industries named below with the 14 sets of financial data presented in Exhibit 1. Use any approach you find helpful. Advertising agency (about half of total revenue derived from commissions that equal 15% of media purchases for clients) Airline Bookstore chain Commercial bank (fitted into the most nearly comparable balance sheet and ratio categories of the rnonfinancial companies) Computer software developer Department store chain (with its “own brand” charge card) Electric and gas utility (with 72% of its revenue from electricity sales and 28% of its revenue from natural gas sales) Family restaurant chain Health maintenance organization Online bookseller Profesor Willan E. Fruhan J. prepared the original version of ths case, “The Cas ofthe Uldenfed Inuses—1985” HBS No, 2408. ‘This version was also prepared by Professor Wilnm E. Fruhan J, This case was developed from publahed sours, HBS cass ae developed sell the bass for Gass dacuion. Case are not intended 1 serve a endorsements sources of pimary daa or Musas fcecive ot Inefecve management © 20072008 President and Fellows of Harvard College, To onder copies or request persion to reproduce materials, call -00545- 76, wrte Harvard Busines School Publishing Boston, MA O23, or go to hp / wor Rep harvard. No part of ths pubaton may be Iepreduced sored In a retrieval sytem, wed in a spreadsheet, of taramited tn any form or by any meano—elecronc, mechanical Plotcopying meding or othrwine—orthout the pension of Harvard Business School207.996 ‘The Case of the Unidentified Industriee—2006 line direct factory to customer personal computer vendor (with more than haf of sales to business customers and most manufacturing outsourced) Why do each ofthe industries have the patterns of asset use revealed in Exhibit 1? The sources of financing? The profitability? The inventory tumover? The accounts receivable collection period?207.056 5. Exhibit1 Balance Sheet Percentages and Selected Financial Data for Unidentified Industries [Line Balance Sheet Percentages A Bc Dp he UF UG Un L ee ee 1. Cash and marketable securities a 2 8 9 8 @ 1 3 1 oo a of 2. Accounts recelvable 78 ot ist 1 SoS 6 @ es ft ow 3. Inventories 6 ee 6 60 fF Oo oe a ee 4. Other curent assots Ho oO @ 5s 6 o 5s 53 5 2 6 6 ° 65. Plant & equipment (net) re Sr ° 6. Other assets oe ee 7. Total assots® : Joo 700 «100 100-700. 100-100» 00. 700.-« «100-700 10100100 8. Notes payable 0 0 0 WO 6 0 6 6s ee 8. Accounts payable Te ee 5 10. Accrued items (ee 1 58 6 86 8 £€ 5 6 G6 11. Othor current abies o 0 oOo % 98 2% o 1% oo 3 5 5 © 06 12. Long-tomm debt “1 Of 6 hw 0 2 se 8 eo ls 13. Other lablties oom ww 6 oo ee le ° 14, Preferred stock o 0 © o© © © o0 6 © o o 1 of 18. Common stock —l 8 48 wa tat mkt 16. Total abities and net worth® 700 100 «100-100, 100-100 00 100-100» 00S 400» 100 00S 700 Selected Financial Data 17, Current assets/curent abiltios 182 123 141 185 82218 1.405798 1.38 958817 18. Cash, MS,and ARs/curent igbilties §=§ «1.18 311.122.041.008 at 88 re 17 19. Inventory tumover (X) 27 16 NA 62 NA 223 102 23 yes NANA 20. Recelvablos collection period (days) ul So we Of et a 4 12 4071 21. Total debtotal assets 00 ‘te 1888 22. Long-term debticepitalization r 0 33° 0? a7 1815 23. Revenuefotal assets 499° 675 696 2079190 2956 675 423 S42 Bt 24, Net profivrevenue 158.074 285.022.059.018 08, 068 072 (204 25. Net profitotal assets 1059-050 181.045 112,047 “0a 029 098.016 26. Total essetsinet worth 7a 403174 274 245 467 (245 330 210 1328 27. Not profivnet worth 200 514123 2752804 096 082218 Source: Compiled from company anrwal reports NA= Not applicable Column totals may not add to 100 due to rounding.