Comparison within Industries
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CASE 1: The Financial Detective, 1996 Comparison within Industries Health Products: The first company holds a substantial number of patents on original research. Therefore it would have a higher profit margin, as there is little to no competition in the area of original products. Because distributes drugs to only doctors and hospitals it would have a relatively low inventory and receivables. This would result in a lower current ratio. In contrast the second company mass markets a broad line of over-the-counter products and therefore would face higher competition, resulting in a lower profit margin. Furthermore since it adopts a mass-market approach it would have a relatively higher inventory, and a higher asset turnover ratio. Based on the above analysis, I conclude that the first company is Company B, and the second company is Company A. Household Appliances: The first of the Household appliance companies focuses on a high quality with a commensurate price strategy and therefore would...


