By: Abigail O’Brien, Stacie Rocco, and Naji Yousef

The Case of the Unidentified Healthcare Companies

Case Questions
(27 points; 3 points per question)

Please answer the following question on The Case of the Unidentified Healthcare Companies -
2010. List each question followed by your answer below the question. You receive 1 point for
each correct answer and 2 points for how well you support your answer.

1. Identify the companies listed on page 3 of the case for A, B, D, F, H, I, K, L, and

M.

a. List the type of healthcare segment they represent (Biotechnology,

Community Nursing, Distributor (medical), etc.)

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b. Support your answers with data from each firm’s common Balance Sheet,

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calculated ratios, and other data. Include at least 3-4 data points for each
company to support your answer. In order for your report to be thorough, it

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should be approximately 3 pages.
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c. The Community Nursing, Home Care Provider, and Lab/Diagnostic firms
are not any of the answers.
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Note the common size financial information for firms F and K is relatively similar. If
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you reverse the answers on these two firms but support your answers well, you will
receive full credit.
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1. Biotechnology: B
○ Biotechnology was the first choice due to the high R&D. The description stated that this
firm “engages in the discovery and development of breakthrough small molecule drugs

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 By: Abigail O’Brien, Stacie Rocco, and Naji Yousef

for serious diseases; revenues are generated primarily through collaborative R&D”. The
R&D for B is -540 which is the single highest in that category, leading us to
Biotechnology.
○ No Inventory
○ Highest Gross Profit out of all the companies.
2. Medical Device Manufacturer: L
○ The Medical Device Manufacturer is a “leading researcher, developer, and manufacturer
of highly profitable, implantable biomedical devices” which led us to believe it is L
because:
○ They have one of the Highest Gross Profits of 81, because they are a highly profitable
firm of biomedical devices.
○ Since the firm is a developer of medical devices, we expected them to have a high PP&E.
They have a higher PP&E of 30, which is expected because they are a manufacturer who
will have locations and equipment to run their factories.
○ The firm’s R&D is the second highest at 20. This company is a leading researcher in their

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field, leading us to believe the second highest R&D will be this company, the Medical

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Device Manufacturer.

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3. Private Practice: M

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○ No Equity in a Private Practice of 40 Doctors- This is not a public company.

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○ The Gross Profit is high (76 which is 3rd highest) which we can expect from a Private
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Practice who will charge higher for their services than the average doctor’s office.
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○ This firm has a Net PP&E of 7, which is on the lower side but accurate because they have
8 locations within one major US metropolitan area.
○ Higher Days of Inventory of 142, a Private Practice office is going to have a higher
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Inventory sit longer due to the nature of their care & business.
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○ Higher but Average Receivables Collection Period for a Private Doctor’s office.
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4. Pharmaceuticals (Generic): K
○ - High Inventory: the company has the highest inventory among those
companies with inventory due to its international scale.
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○ - High SGA: makes sense because they have to advertise their products all over
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the globe.
○ - No RD (0): Generic pharmaceutical is not a research company
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○ High Goodwill
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5. Durable Medical Equipment (DME) Developer and Seller: F

○ Adverse collections (132 days) as described
○ Has Inventory (10%) because they are a manufacturing company
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○ Days of inventory is high (186 days) because they also license their inventories
○ Relatively high SG&A (-23%) given a “seller” type company
○ (leading licensee and manufacturer of DME, including wheelchairs, bariatric equipment,
disability scooters, respiratory products, and other home care products; recent regulation
of qualification processes for Medicare, the primary payor for this DME, has adversely
affected collections

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 By: Abigail O’Brien, Stacie Rocco, and Naji Yousef

6. Distributor (Medical): D
○ Inventory (33): Distributors generally have a large inventory at hand. Of all
companies listed, D has the highest inventory.
○ Account payable (47): The company has the highest account payable, which
represents the money to be collected by customers/buyers for its distribution
activity.
○ COGS (-95) The company also has a high COGS, which leads to low Gross Profit
(5) and low Net Income (1), which is true for distributors.
○ (global supplier of medical products and services, from pharmaceuticals to medical
supplies)

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7. Durable Medical Equipment (DME) Licensee and Seller: I

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○ Durable Medical Equipment (DME) Licensee and Seller manufacture and sell medical

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equipment. This will mean the Durable Medical Equipment (DME) Licensee and Seller

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Inventory should be relatively high. We have selected Company I as the Durable Medical

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Equipment (DME) Licensee and Seller, as it has an Inventory of 13%.
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○ Durable Medical Equipment (DME) Licensee and Seller manufacture each product and
distribute. This will mean their Long-term debt will be relatively high and the Gross
Profit should be low. Company H has a Long-term debt of 20% and has a Gross Profit of
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29%.
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○ Since the Durable Medical Equipment (DME) Licensee and Seller company sells a
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product they will need a warehouse for storage/distribution. Therefore, it’s Property, Plant
and Equipment should be relatively high. The Property, Plant and Equipment of
Company I is 10%, which supports this position.
8. Hospital (Diversified): H
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○ While a Hospital (Diversified) leases property they do not sell a product. This will mean
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the Hospital (Diversified) inventory should be very low. We have selected Company H as
the Hospital (Diversified), as it has an inventory of zero.
○ Hospital (Diversified) owns and leases care hospitals so they do not have development
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cost, but they do have property and other costs. This will mean their Long-term debt will
be high and the Gross Profit should be low. Company H has a Long-term debt of 54%,
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which is the highest out of all companies, and has a Gross Profit of 40%.
○ Since the Hospital’s product is leasing care hospitals, they should have a high Property,
Plant and Equipment. Hospital (Diversified) owns and leases care hospitals in a dozen
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states so they should have a relatively high Property, Plant and Equipment. The Property,
Plant and Equipment of Company H is 54%, which supports this position.
9. Insurer: A
○ Insurer’s sell an intangible product so their inventory should be low. We have selected
Company A as the Insurer, as it has an Inventory of zero.
○ Insurer’s do not have to pay for a tangible product, but they do have to pay for their

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 By: Abigail O’Brien, Stacie Rocco, and Naji Yousef

intangible product. Insurer’s normally have to pay for their customers and the risk that is
involved. This will mean the Insurer Gross Profit should be low and their Other Liability
should be high. Company A has an Other Liability of 44%, which is the highest of all
companies, and it has a Gross Profit of 25% which is very low.
○ Since the Insurer’s product is not a tangible product, they do not need a lot of Property,
Plant and Equipment. Employees can work from home but there might be a few that
would need to work in an office. Meaning they only require office space and some
computer/office equipment. Therefore, it’s Property, Plant and Equipment expense should
be low. The Property, Plant and Equipment of Company A is 1%, which supports this
position.
10. Nursing Home Operator NOT USING
11. Pharmaceuticals (Branded) NOT USING

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