FINANCIAL DETECTIVE CASE Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

FINANCIAL DETECTIVE CASE Study Solution

Introduction

The objective of this case is to analyze the companies within the same industry to evaluate their performance based on their financial statements. This case analyzes the given data and the companies’ financial statements and ratios. We will analyze the financial ratios of the companies in the industries and interpret them.

Health products

Company 1 is a pharmaceutical company.It is a large company around the world with huge Research and development budget due to its several ethical pharmaceuticals. The company has recently diversified in non-pharmaceutical business category and it is looking to issue license for any biotech company. The intangible assets of company B is higher than the company A, which means that the company B is company 1 and it has huge research investment. A high-intangible-assets-heavy Healthcare company will have a lower cash flow.

The intangible value of the company will be lower. This will reduce its ability to compete in the market. As a result, intangible assets are crucial to the success of a healthcare company. Intangible assets are also the primary source of competitive advantage. As such, intangibles play an important role in buy/sell transactions, licensing agreements, and other types of commercial relationships.

Company 2 is a health care product company, which has several products, such as:. non-prescribed drugs, health and beauty products, medical devices. The company’s strategy is to develop and market the brand. . The net fixed assets of the company are higher for the company A which means that the company A is company 2. The impact of a high net fixed asset on a company in the health industry can be calculated with a ratio called the fixed asset turnover rate. This figure reflects the amount of sales that are made on each dollar of fixed assets.

If the ratio is high, the company is making money, but it may also mean that it is spending more than it is making. However, this ratio should not be too high or it may be a sign that the company is not doing very well. Company A needs higher budgets for heavy machinery. Company A is Johnson & Johnsons (J & J). A high net fixed asset turnover ratio is important to the company's success.

A high turnover ratio does not necessarily mean that the business is inefficient. This does not mean that it cannot increase its sales. A high fixed asset turnover ratio does not imply that the business is inefficient, but it does indicate that it is not investing its money in the future. If a company has a high net fixed asset; it can afford to invest more in product development and manufacturing.

In the provided information about companies it is stated that company 1 has diversified recently in the statements we can see that the deferred tax of company B have higher value and it confirms that it is company 1 whereas the cost of goods sold for the company A is higher, which means that the company

A has high production expenses and it does not have economies of scale. So we conclude that in health products industry; the company B is prescription- pharmaceutical company and it is diversified health Product Company; whereas, company B is Pfizer. The impact of high cost of goods sold on the company in the healthcare industry is a major issue for businesses. A lack of competitive pressure is a major concern for most companies. The impact of high costs can be devastating to the bottom line. One example is the U.S. market for blood tests. While some cities have more expensive blood tests than others, the U.S. health-care industry is the largest consumer spending sector.

Beer

Company 1 is a brewer company that is a mass market beer company. This company has several beer brands, beer businesses and theme parks. The company has huge distribution network and breweries.

Company 2 is a small production company which has small quantity of production and higher prices. The company mostly outsources brewing and it is financially conventional. The company has recently worked on cost saving strategies to accommodate the cost of freight and packaging.

The net fixed assets are higher in company C, alongside which, the company C has higher long term debt as compared to company D, which depicts that the company C is company 1.The high net fixed asset ratio is the result of the depreciation of the assets in the beer industry. If the ratio is low, then it does not mean that a company is inefficient, but it rather means that the asset turnover rate does not reflect its efficiency. In addition, a low ratio does not signify inefficiency. The low value of a company's net fixed asset does not necessarily mean the absence of reinvestment. The impact of a high net fixed asset on the company in the beer industry is a low turnover ratio. Inefficiency in the beer industry means that a company's fixed assets have a very low turnover. Therefore, a high fixed-asset turnover ratio is an indication that the firm is inefficient and has a low net asset.

This is a negative sign, but a low ratio does not mean the company is inefficient. If we notice the equity of Company D; it hassmall net profit margins because it has small production volume. The prices of the products are higher but it require even more resources to produce the beer. The SG&A expenses of the company D is higher than the company C. Company D has higher cash and current assets due to their strategy of cost saving so company D is company 2. Selling general and administrative expenses (SG&A) are costs associated with preparing goods for sale and promoting sales. It also covers the costs for salaries, rent, utilities, personnel, credit checks, collections, and other overheads. However, it should be noted that not all G&A expenses can be deducted on a tax return. To be deductible; G&A expenses must be ordinary and reasonable.

SG&A expenditures have a positive impact on the company's gross margin. However, some companies are uncertain if a low SG&A level can have a negative impact on the company's profit. In other words, if SG&A costs are lower than expected, profits will suffer. A high SG&A level will have a negative impact on a company's earnings...............

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