Industry Insights: Financial Statement Analysis Across Diverse Sectors

Finance Detective
(Financial Statement Analysis, A Strategic Perspective, Clyde P. Stickney/Amos Tuck School of
Business Administration, Darthmouth College)
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:
1. Advertising agency
2. Aerospace manufacturer (significant government contracts)
3. Beer brewery
4. Computer manufacturer
5. Department store chain
6. Distiller of hard liquor
7. Electric utility
8. Finance company (also involved in leasing)
9. Grocery store chain
10. Life insurance company
11. Pharmaceutical company
12. Professional basketball franchise (a partnership)
13. Steel manufacture
Exhibit – Data for Ratio Detective Exercise
Company Numbers
Balance Sheet at End of Year
(1)
(2)
(3)
(4)
(5)
Cash and Marketable Securities
0.7%
19.1%
9.0%
Current Receivables
0.2%
4.5%
16.3%
0.9% 11.9% 4.9% 15.2%
Inventories
7.5%
Property, Plant, and Equipment Cost
17.0%
0.8%
Accumulated Depreciation
-5.5%
Net
Other Assets
Total Assets
21.3%
76.0%
76.1% 79.9%
84.9%
(6) (7) 1.6% 4.4% 22.7% 36.2% 13.5% 21.3% 13.2% 70.6% 11.9% 5.6% 13.2% 14.4% 21.7% 13.0% 10.5% 7.5% 42.90% 79.40% 54% 37.50% 25.30% 65.90% 162.5% 18.40% 3.60% 398.4% 70.8% -1% -21.0% -21.7% -26.9% -12.0% -11.8% -27.4% -80.5% -9.3% -1.8% -109.6% -21.4% 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% 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% 47% 71.6% 112.2% 114.8% 123.7% 311% 317.7% 694.6%
(8)
(9)
(10)
(11)
(12) (13)
5.1%
14.4%
245.6%
1.0% 25.20%
11.90%
7.8% 562.5%
11.4%
Current Liabilities
7.8%
21.0%
32.7%
Long-term Debt
3.6%
6.3%
Other Noncurrent Liabilities
1.4%
15.6%
Owners’ Equity
8.5%
Total Equities
21.3%
10.3% 27.1% 46.9% 71.6%
13.2% 22.3% 35.1% 15.3% 43.6% 12.5% 87.1% 203.9% 30.4% 437.5% 14.7% 8.7% 11.6% 17.4% 3.3% 18.0% 4.3% 21.4% 126.0% 196.1% 5.5% 14.2% 4.9% 6.8% 10.8% 12.9% 5.0% 7.8% 8.4% 23.1% 12.2% 33.9% 40.2% 26.4% 41.4% 52.4% 79.3% 24.5% 77.5% 138.2% 48.8% 76.0% 76.1% 79.9% 84.9% 112.2% 114.8% 123.7% 311.2% 317.7% 694.6%
Company Numbers
Income Statement for Year
(1)
Sales
(2) 100.0% 100.0% 100.0%
(3)
(4) 100.0%
Cost of Goods Sold (excluding depreciation) or Operating Expenses
76.9%
61.8% 74.8%
62.0%
(5) 100.0% 71.1%
Depreciation
1.4%
0.1%
4.1%
3.6%
6.8%
Interest
0.4%
1.9%
0.7%
0.8%
0.5%
1.3%
Advertising
3.6%
0.5%
8.0%
3.3%
(6) (7) (8) (9) (10) (11) (12) (13) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 72.1% 46.5% 26.60% 86.10% 89.60% 86.60% 57.80% 21.80% 2.6% 2.0% 4.20% 6.60% 2.60% 0.90% 10.20% 14.80% 2.0% 1.10% 1.80% 1.20% 3.40% 10.10% 47.30% 11.2% 4.00%
Research and Development
3.5%
–
7.7%
–
Income Taxes
1.1%
All Other Items (net)
Total Expenses
Net Income
15.5% -0.7% 98.9% 63.6% 1.1% 36.4%
Cash Flow from Operations Capital Expenditures
1.22%
1.09%
1.09%
11.20% 4.5% 5.5% 2.8% 2.9% 6.6% 9.90% -4.10% 3.90% 2.50% 8.20% 7.00% 7.2% 13.4% 6.5% 13.5% 23.5% 25.10% 6.40% -1.30% -1.20% -5.50% 94.8% 93.3% 95.4% 95.7% 91.8% 82.1% 96.8% 96.0% 92.2% 80.8% 90.9% 5.2% 6.7% 4.6% 4.3% 8.2% 17.9% 3.2% 4.0% 7.8% 19.2% 9.1% 2.95% 1.17% 5.20% 5.20% 3.06% 44.80% 0.95% 0.80%
1.36%