FINANCIAL MANAGEMENT

WEEK 1
YP-64B
Rizqi Ghani Faturrahman
29120382
Finance Detective
Effective financial statement analysis requires an understanding of the economic characteristics of
the firm being analyzed. Many of these economic characteristics are captured in the relationship
between various financial statement items. The exhibit presents condensed financial statement
information for firms in 13 different industries. Balance sheet and income statements items are
expressed as a percentage of total revenues (that is, all amounts are divided by total revenues for the
year). The 13 companies (all corporations except the professional basketball franchise) shown
represent the following industries:

A. Advertising agency 3
B. Aerospace manufacturer (significant government contracts) 9
C. Beer brewery 6
D. Computer manufacturer 8
E. Department store chain 4
F. Distiller of hard liquor 7
G. Electric utility 12
H. Finance company (also involved in leasing) 13
I. Grocery store chain 1
J. Life insurance company 11
K. Pharmaceutical company 5
L. Professional basketball franchise (a partnership) 2
M. Steel manufacture 10

Use whatever clues that you can to match the companies in the exhibit with the industries listed above.
Answer:
1. Grocery Store Chain
The considerations for choosing a Grocery Store Chain are:
The small gap between Sales and COGS indicates that sales per product do not have a high margin as
the sales margin for vegetable products. In addition there are no R&D costs.
2. Professional Basketball Franchise (Partnership)
The considerations for choosing a Professional Basketball Franchise (Partnership) are:
Property, Plant, and Equipment are very low at only 0.8% because in the franchise business, assets are
recognized and recorded by franchise buyers so that franchise providers do not recognize and record
significant assets.
3. Advertising Agency
Considerations for choosing an Advertising Agency are:
There are no advertising costs, but there are R&D costs because the advertising agency needs to do
advertising planning by knowing and analyzing products, clients, competitors, to market conditions
for these products.
4. Department Store Chain
The considerations for choosing a Department Store Chain are:
There are no R&D costs, but the advertising costs are quite high. In addition, the sales margin per
product is not too high.
5. Pharmaceutical company
Considerations for choosing a Pharmaceutical company are:
The R&D cost is quite high at 7.7% because pharmaceutical companies have to do a lot of testing and
research before finally finding the right drug formula. In addition, the company does not incur
advertising costs because in general, promotions for drugs are carried out by Detail directly to
doctors, not through advertising media media
6. Beer Brewery
Beer Brewery selection considerations are:
There is no R&D fee but there is an advertising fee
7. Hard Distiller Liquor
The considerations for choosing a Liquor Hard Distiller are:
The highest advertising cost is 11.2% and the proportion of income tax is also high, namely 23.5%.
8. Aerospace Manufacturer
Aerospace Manufacturer selection considerations are:
Negative income tax indicates that the company gets tax incentives that might be obtained if the
company make a contract with the government.
 9. Computer Manufacturer
Computer Manufacturer selection considerations are:
The highest R&D cost is 11.2% because computer companies continue to innovate due to very
dynamic technological developments. In addition, the company still incurs advertising costs because
computer products still require promotion through advertising media
10. Life Assurance
The considerations for selecting the life assurance industry are:
Cash and marketable securities have 245% which occurs because in the ordinary insurance industry
they get cash in the form of premiums paid by clients and on these client funds are invested in
marketable securities to get benefits.
11. Steel Manufacturer
Steel Manufacturer selection considerations are:
The company does not incur advertising and R&D costs because the business does not require these
activities. In addition, the accumulated depreciation is low because the product is equipment.
12. Electricity Utility
The considerations for choosing Electricity Utility are:
Property, Plant, and Equipment is high at 398.4% which occurs because the power company has many
factories and power plants so that the property value is high. In addition, the accumulated depreciation
is also large at 109.6% which indicates that the property is equipment that quickly wears out, not a
building.
13. Finance
Considerations for selecting the finance industry are:
The current receivable condition is very large, namely 562.5% because the finance industry is engaged
in providing interest-bearing loans to borrowers, so that the banking industry naturally has a very large
percentage of receivables.
 Exhibit - Data for Ratio Detective Exercise

Company Numbers
Balance Sheet at End of Year (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Cash and Marketable Securities 0.7% 19.1% 9.0% 0.9% 11.9% 1.6% 4.4% 22.7% 5.1% 14.4% 245.6% 1.0% 25.20%
Current Receivables 0.2% 4.5% 16.3% 4.9% 15.2% 36.2% 13.5% 21.3% 13.2% 70.6% 11.90% 7.8% 562.5%
Inventories 7.5% - 11.9% 5.6% 13.2% 14.4% 21.7% 13.0% 10.5% 7.5% - 11.4% -
Property, Plant, and Equipment Cost 17.0% 0.8% 42.90% 79.40% 54% 37.50% 25.30% 65.90% 162.5% 18.40% 3.60% 398.4% 70.8%
Accumulated Depreciation -5.5% -1% -21.0% -21.7% -26.9% -12.0% -11.8% -27.4% -80.5% -9.3% -1.8% -109.6% -21.4%
Net 11.5% 0.1% 21.9% 57.7% 27.1% 25.5% 13.5% 38.5% 82.0% 9.1% 1.8% 288.8% 49.4%
Other Assets 1.40% 23.20% 12.50% 6.90% 8.70% 2.20% 31.80% 16.7% 4.0% 22.1% 51.9% 8.7% 57.5%
Total Assets 21.3% 47% 71.6% 76.0% 76.1% 79.9% 84.9% 112.2% 114.8% 123.7% 311% 317.7% 694.6%

Current Liabilities 7.8% 21.0% 32.7% 13.2% 22.3% 35.1% 15.3% 43.6% 12.5% 87.1% 203.9% 30.4% 437.5%
Long-term Debt 3.6% - 6.3% 14.7% 8.7% 11.6% 17.4% 3.3% 18.0% 4.3% 21.4% 126.0% 196.1%
Other Noncurrent Liabilities 1.4% 15.6% 5.5% 14.2% 4.9% 6.8% 10.8% 12.9% 5.0% 7.8% 8.4% 23.1% 12.2%
Owners' Equity 8.5% 10.3% 27.1% 33.9% 40.2% 26.4% 41.4% 52.4% 79.3% 24.5% 77.5% 138.2% 48.8%
Total 21.3% 46.9% 71.6% 76.0% 76.1% 79.9% 84.9% 112.2% 114.8% 123.7% 311.2% 317.7% 694.6%
Equities
Company Numbers
Income Statement for Year (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold (excluding depreciation) or
76.9% 61.8% 74.8% 62.0% 71.1% 72.1% 46.5% 26.60% 86.10% 89.60% 86.60% 57.80% 21.80%
Operating Expenses
Depreciation 1.4% 0.1% 4.1% 3.6% 6.8% 2.6% 2.0% 4.20% 6.60% 2.60% 0.90% 10.20% 14.80%
Interest 0.4% 1.9% 0.7% 0.8% 0.5% 1.3% 2.0% 1.10% 1.80% 1.20% 3.40% 10.10% 47.30%
Advertising 3.6% 0.5% - 8.0% - 3.3% 11.2% 4.00% - - - - -
Research and Development - - 3.5% - 7.7% - - 11.20% - - - - -
Income Taxes 1.1% - 4.5% 5.5% 2.8% 2.9% 6.6% 9.90% -4.10% 3.90% 2.50% 8.20% 7.00%
All Other Items (net) 15.5% -0.7% 7.2% 13.4% 6.5% 13.5% 23.5% 25.10% 6.40% -1.30% -1.20% -5.50% -
Total 98.9% 63.6% 94.8% 93.3% 95.4% 95.7% 91.8% 82.1% 96.8% 96.0% 92.2% 80.8% 90.9%
Expenses
Net Income 1.1% 36.4% 5.2% 6.7% 4.6% 4.3% 8.2% 17.9% 3.2% 4.0% 7.8% 19.2% 9.1%
Cash Flow from Operations + Capital Expenditures 1.22% - 2.95% 1.17% 1.09% 1.09% 5.20% 5.20% 1.36% 3.06% 44.80% 0.95% 0.80%