Financial Statement Analysis

The six companies in following exhibit are drawn from the following six industries:

(i) Airline - 6

(ii) Consumer finance – company 5

(iii) Newspaper publishing 4

(iv) Department store -3

(v) Aerospace – company 2

(vi) Chemicals and drugs 1

Based on the common-size statements, match each company to its industry. Briefly discuss the

balance sheet and income statement characteristics that enabled you to identify the industry to

which each company belonged.

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Common -Size Balance Sheets (%)
Company 1 2 3 4 5 6
Cash and short term investments 2 13 1 1 22 6
Receivables 17 8 28 11 16 8
Inventory 15 52 23 2 0 5
Other current assets 6 0 1 2 1 0
Current Assets 40 73 53 16 39 19
Gross property 86 40 44 65 1 106
Less: Accumulated Depreciation 50 19 15 28 0 34
Net Property 36 21 29 37 1 72
Investments 3 1 0 16 55 0
Intangibles and other assets 21 5 18 31 5 9
Total assets 100 100 100 100 100 100
Trade Payables 11 21 13 11 NA 20
Debt payable 4 0 6 2 46 4
Other current liabilities 9 43 0 1 16 8
Current Liabilities 24 64 19 14 62 32
Long term debt 20 5 27 24 27 21
Other liabilities 16 0 21 13 5 12
Total Liabilities 60 69 67 51 94 65
Equity shareholders funds 40 31 33 49 6 35
Total Liabilities and Equity 100 100 100 100 100 100
*NA = Not Available            

Common-Size Income Statements (%)

Company 1 2 3 4 5 6
Revenues 100 100 100 100 100 100
Cost of goods sold 58 81 63 59 0 0
Operating expenses 21 7 28 29 55 91
Research and Development 7 5 0 0 0 0
Advertizing 3 0 2 NA 0 2
Operating Income 11 7 7 12 45 7
Net interest expense (income) 1 -1 2 3 41 1
Income from continuing operations before tax 10 8 5 9 4 6
Asset turnover ratio (Times) 0.96 1.12 1.38 0.96 0.15 0.96
*NA = Not Available            

Other current liabilities 9 43 0 1 16 8

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43 is deferred revenue, advances collected by the company

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