Ratios Tell a Story

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software development. With Company 2 being computer software development, Company 9 is pharmaceuticals with a high gross margin of 64.9% which shows the ability to maintain high drug prices paired with the high R&D ratio to stay above competition.

10 - Internet Retailing: Company 10 has 0.1% of assets as cash on hand, this is the lowest among all companies. It also has a relatively equal mix of inventory, accounts receivable, accounts payable and property plant and equipment. This indicates that the company is a retailer but doesn’t have sales in cash. Internet retailing company is the only company where transactions can not be paid in cash as there is no transaction made in person, and, thus, we pick Company 10 as internet retailing.

11 - Commercial banking: Company 11 has no inventory or goodwill. Company 11 has a high percentage of accounts payable (84.7%) and is financed mostly with debt. In addition, Company 11 also has an extraordinarily long receivable collection period of 4359 days. This aligns with the nature of commercial banking companies because they take deposits from customer and all deposits are essentially debt to the customers. The receivable collection period is reasonable as commercial banking companies may take customers’ money and invest it into certain projects, these projects may have very long maturity periods.

12 - Wholesale food distribution: Company 12 has a high inventory turnover of 52.7 times and a high property plant and equipment level. This could happen in a distribution company as they take inventories and ship them to its clients immediately. A large amount of property plant and equipment is required to sort and ship their inventories. Therefore, we believe Company 12 is a wholesale food distribution company.

13 - Electric Utility: The key indicator for company 13 is its receivable collection period. It takes Company 13 45-days to collect the payment from its customers, a normal occurrence for a utility company, where the company normally bills their customers through mail and gives them approximately 30 days to make the payment. Also, Company 13 has 64% of its assets as property plant and equipment, utility firms tend to have a lot of property plant and equipment to support their capacity. In addition, the fact that Company 13 doesn’t have a lot of inventories and accounts payable, means it doesn’t have a lot of suppliers for its operation, further supporting that Company 13 is an electric utility firm.