Ateneo de Cagayan University

November 4, 2010-12-04
Problem:

The Unidentified Philippine Industries

Objective:

To match each seven sets of financial data against the seven industries cited in the case.

Areas of consideration:

1. Nature of business

Identifying each seven companies according to nature of business (e.g. service, manufacturing,
mining/exploration).

2. Common- size balance sheet

The following line items that we considered:

a. Inventories for all companies

b. Allowance for doubtful accounts for management (holding) company and development
financing corporation.
c. Project development costs for management holding company and development
financing corporation.
d. Due from affiliated companies for management holding company and development
financing corporation.
3. Common-size income statement
a. Cost of sales for all companies.
b. Lumping of cost of sales and operating expenses.
c. Net profit margin for telecommunication firm (worldwide telegraph services).
4. Selected ratios and other market information.
a. Trade receivable collection period (in days) for cement corporation, development
financing corporation.
b. Inventory turn-over for all companies.
c. Return on asset for telecommunication firm (worldwide telegraph services).
d. Return on equity for telecommunication firm (worldwide telegraph services).
Alternative courses of action:

1. Gather the financial statements of the companies belonging to the seven industries.

Advantage(s):

a. This serves as a first step in the process of elimination through matching the
financial data against the financial statements of the different companies
researched.

Disadvantage(s):

a. Careful research should be followed, otherwise the following steps cannot

be relied upon.

2. Classify the seven industries according to their nature of business.

Advantage:
a. After having studied the financial statements of each companies, the group
was able to qualify specific industries accordingly.
b. The process of elimination helps to simplify the identification of respective
industries based on the financial statements given.

Disadvantage:

c. If not properly categorized and identified, there is room for errors hence,
will lead to wrong conclusion.

3. Compare the seven industries’ financial data shown in their common size balance sheet,
income statement, financial and market ratios. Consequently, proceed further to the
process of elimination.

Advantage:

a. The data that will be extracted from known companies in each industry is a
helpful and reliable information that can serve as basis for the identification
of the seven unidentified industries.

Disadvantage:

a. Companies under same industries must be carefully studied upon otherwise

it will lead into confusion since financial data of some companies are close to
each other.
Recommendation:

We recommend all alternative courses of action since all of these are indispensable in arriving
with our conclusion. Thus, our conclusion is...

Gold mining company- set 1

Management (holding) company- set 3

Telecommunication firm (worldwide telegraph services)-set 5

Cement corporation- set 7

Development financing corporation-set 4

Integrated soft drinks and food manufacturing firm- set 6

Medium to large telephone utility firm- set 2