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SEPTEMBER 13, 2013

MIHIR A. DESAI

WILLIAM E. FRUHAN, J
R.

ELIZABETH A. MEYER

The Case of the Unidentified Industries—2013

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 the 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.

Airline

Bookstore chain

Commercial Bank (fitted into the most nearly comparable balance sheet and ratio categories of the
nonfinancial companies)

Computer software developer

Department store chain (with its “own brand” charge card)

Electric and gas utility (with 80% of its revenue from electricity sales and 20% of its revenue from
natural gas sales)

Online direct factory to customer personal computer vendor (with more than half of sales to business
customers and most manufacturing outsourced)

Online retailer

Parcel delivery service

Professor William E. Fruhan, Jr. prepared the original version of this case, “The Case of the Unidentified Industries—1995,” HBS No. 296-049.
This version was prepared by Professor Mihir A. Desai and Research Associate Elizabeth A. Meyer. This case was developed from published
sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary
data, or illustrations of effective or ineffective management.

Copyright © 2013 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-
7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be
digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

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214-028 The Case of the Unidentified Industries—2013

Pharmaceutical manufacturer

Restaurant chain

Retail drug chain

Retail grocery chain

Social networking service

Why does each of the industries have the patterns of assets use revealed in Exhibit 1? The sources
of financing? The profitability? The inventory turnover? The accounts receivable collection period?

This document is authorized for educator review use only by Rinaningsih Rinaningsih, Other (University not listed) until Oct 2021. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
This document is authorized for educator review use only by Rinaningsih Rinaningsih, Other (University not listed) until Oct 2021. Copying or posting is an infringement of copyright.

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Exhibit 1 Balance Sheet Percentages and Selected Financial Data for Unidentified Industries
214-028 -3-

Line Balance Sheet Percentages A B C D E F G H I J K L M N

1. Cash and marketable securities 35 4 27 25 20 54 64 9 5 16 4 2 16 7

2. Accounts receivable 10 4 21 7 16 12 5 3 4 26 6 2 2 83
3. Inventories 19 38 3 4 0 1 0 3 21 17 21 3 0 0
4. Other current assets 1 9 8 5 4 4 6 6 2 4 1 2 5 0
5. Plant & equipment (net) 22 16 4 8 46 7 16 47 60 32 36 60 69 0
6. Other assets 13 29 37 52 14 22 10 32 7 5 32 31 9 10
7. Total assetsa 100 100 100 100 100 100 100 100 100 100 100 100 100 100

8. Notes payable 0 0 8 3 5 2 0 0 11 0 4 4 1 50
9. Accounts payable 41 22 24 2 6 3 2 8 18 12 13 2 6 21
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10. Accrued items 17 15 8 1 5 3 3 9 4 5 5 1 6 0

11. Other current liabilities 0 9 9 9 6 18 2 7 11 10 4 2 12 3
12. Long-term debt 9 2 11 17 29 9 10 33 25 39 12 32 16 13
13. Other liabilities 7 17 17 24 38 9 5 18 13 10 7 23 22 4
14. Preferred stock 0 15 0 0 0 0 0 0 0 0 0 0 0 0
15. Common stock 25 19 23 44 12 55 78 25 17 24 54 36 38 10
16. Total liabilities and net wortha 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Selected Financial Data

17. Current assets/current liabilities 1.12 1.19 1.19 2.64 1.86 2.71 10.71 0.87 0.72 2.28 1.23 1.01 0.91 1.36
18. Cash, MS, and ARs/current liabilities 0.78 0.18 0.97 2.07 1.67 2.53 9.83 0.49 0.20 1.53 0.40 0.45 0.71 1.23
19. Inventory turnover (X) 7.6 3.7 32.4 1.6 NA 10.4 NA 31.5 14.9 5.5 7.3 2.3 NA NA
20. Receivables collection period (days) 20 8 63 77 41 82 52 8 4 64 11 51 7 8047
21. Total debt/total assets 0.09 0.02 0.19 0.20 0.33 0.11 0.10 0.33 0.36 0.39 0.16 0.36 0.17 0.63
22. Long-term debt/capitalization 0.27 0.06 0.33 0.28 0.70 0.14 0.11 0.57 0.59 0.62 0.18 0.47 0.29 0.56
23. Revenue/total assets 1.877 1.832 1.198 0.317 1.393 0.547 0.337 1.513 3.925 1.502 2.141 0.172 0.919 0.038
24. Net profit/revenue -0.001 -0.023 0.042 0.247 0.015 0.281 0.010 0.117 0.015 0.061 0.030 0.090 0.025 0.107
25. Net profit/total assets -0.001 -0.042 0.050 0.078 0.021 0.153 0.004 0.177 0.061 0.091 0.064 0.016 0.023 0.004
26. Total assets/net worth 3.97 2.90 4.44 2.27 8.21 1.80 1.28 4.00 5.85 4.23 1.83 2.77 2.66 9.76
27. Net profit/net worth -0.005 -0.122 0.222 0.178 0.171 0.277 0.005 0.709 0.355 0.384 0.117 0.043 0.060 0.039
28. EBIT/interest expense 7.35 -6.21 11.16 12.26 3.42 63.06 10.55 13.57 5.98 8.05 35.71 2.52 4.24 NA
29. EBITDA/revenue 0.05 0.00 0.07 0.45 0.06 0.40 0.23 0.22 0.05 0.15 0.06 0.28 0.09 0.15

Source: Compiled from company annual reports.

NA = Not applicable.
aColumn totals may not add to 100 due to rounding.