This case presents the student with financial ratios for eight pairs of unidentified companies and asks them to mate the description of the company with the financial profile derived from the ratios. The primary objective of this case is to introduce students to financial ratio analysis—in particular, the range of ratios and the insights each one affords. This case presumes that students have already been introduced to the definitions of various financial ratios through other readings or lectures. Search the web if you need a refresher on ratios (there are many articles and tutorials on this topic).
The structured exploration of pairs of companies within an industry affords a number of important insights into strategy and financial performance. First, the economics of individual industries account for significant variations in financial ratios because of differences in technologies, product characteristics, or competitive structures. Second, financial performance results from managerial choices: within industries, the wide variation in financial ratios is often a result of the differences in corporate strategy in marketing, operations, and finance. For those reasons, this case is a good springboard into subsequent classes, which deal with the interaction of strategy and financial performance.
Case Report Instructions
The report for this case is a bit different from other assignments in the course. For this report, copy and paste the tables that begin on the next page into a Word file (or delete this page and replace with a cover page). For each industry, indicate by typing your letter choice in the second column which data column you think goes with each company description (note that the descriptions have been truncated; see the case for a full company description). For example, in the first table titled “Airline”, indicate in the “Associated Correct Data Column” box whether “A major airline that flies domestically and internationally …” is data column A or B in Exhibit 6.1. You can type the letter (A or B) in the column box (it should be centered, but if not, please center your answer choice).
Then, you must provide at LEAST (more preferred for an excellent report) three (3) reasons for your choices. Type these in the space provided (reasons should be several sentences and they must directly relate to the data in Exhibit 6.1. For example, if you think that an airline that operates both domestically and internationally … would have more Cash and ST Investments than an airline that operates primarily in the United States …, write this as a reason and clearly explain why you believe this to be a reason. Your reasons for your choices are as important (perhaps more so) than whether or not your choices are correct.
| Airlines | |
| Description (see case for extended details) | Associated Correct Data Column (A or B) |
| A major airline that flies both domestically and internationally … | |
| Operates primarily in the United States … | |
Reasons:
| Beer | |
| Description (see case for extended details) | Associated Correct Data Column (C or D) |
| A national brewer of mass-market consumer beers … | |
| The largest craft brewer in the United States … | |
Reasons:
| Computers | |
| Description (see case for extended details) | Associated Correct Data Column (E or F) |
| Sells high-performance computing systems (“supercomputers”) to … | |
| Sells personal computers as well as handheld devices and software … | |
Reasons:
| Hospitality | |
| Description (see case for extended details) | Associated Correct Data Column (G or H) |
| Operates hotels and residential complexes … | |
| Owns and operates several chains of upscale, full-service … | |
Reasons:
| Newspapers | |
| Description (see case for extended details) | Associated Correct Data Column (I or J) |
| Owns and operates two newspapers in the southwestern United States … | |
| Renowned for its highly circulated newspaper offered both in … | |
Reasons:
| Pharmaceuticals | |
| Description (see case for extended details) | Associated Correct Data Column (K or L) |
| A diversified company that sells both human pharmaceuticals … | |
| Focuses on generic pharmaceuticals and medical devices … | |
Reasons:
| Power | |
| Description (see case for extended details) | Associated Correct Data Column (M or N) |
| Focuses on solar power … | |
| Owns large, mostly coal-powered electric-power-generation plants … | |
Reasons:
| Retail | |
| Description (see case for extended details) | Associated Correct Data Column (O or P) |
| A leading e-commerce company that sells a broad range of products … | |
| A leading retailer in apparel and fashion accessories for … | |
Reasons: