The Financial Detective 2005

Jacob Garcia Marcus Kern Irma A. Martinez Case #6 The Financial Detective Our team has focused on the companies’ beta, current ratio, inventory turnover ratio, total debt/total assets ratio and Net Profit Margin to identify if the company is in a healthy state within its industry. After thoroughly examining and analyzing the financial ratios for the eight pairs of unidentified companies, our team has come to the following conclusions.

Beta Current Ratio Inventory Turnover Total Debt/Total Assets Net Profit Margin

Company A .65 1.96 3.08 5.34 17.97

Company B .85 1.50 .93 14.99 21.58

From the above chart our team concluded that Company A is in a healthier state than company B. Based on the highlighted information provided above Company A has outperformed Company B in the health sector. Company A has the substantial ratios of a company that can turn their assets into liquidity at any given time, they are able to pay their debt, and generate a decent amount of profit.

Beta Current Ratio Inventory Turnover Total Debt/Total Assets Net Profit Margin

Company C .60 .92 .93 51.19 15.00

Company D .55 3.35 12.60 14.99 5.76

From these ratios above we can conclude that Company D is healthier than Company C in the Beer Industry. Apart from the net profit margin, Company D is able to turn their assets into liquidity at a faster rate of 2.43x than Company C. The productivity in which they are able to utilize their resources to generate sales and profits is 11.67 higher than Company C.

Beta Current Ratio Inventory Turnover Total Debt/Total Assets Net Profit Margin

Company E 1.20 1.20 67.96 2.18 6.18

Company F 1.05 2.63 74.78 0.00 3.33

From the chart above, both companies have a high beta which makes them more volatile in the market. Overall, Company F can turn their assets into liquidity faster than Company E and their inventory use is being managed well, making the business more efficient in the Computer Industry.

Beta Current Ratio Inventory Turnover Total Debt/Total Assets Net Profit Margin

Company G 1.70 1.57 13.56 56.94 8.50

Company H 0.51 1.49 2.42 7.42 2.53

Based on the ratios above, Company G overtakes the Books and Music Industry. The only issue that our group encountered with Company G is that half of their assets are being financed by creditors, instead of their owners.

Beta Current Ratio Inventory Turnover Total Debt/Total Assets Net Profit Margin

Company I 1.15 1.91 6.75 42.78 1.87

Company J 1.10 1.94 7.11 18.36 1.96

In the paper industry, Company J is more proficient in all ratios aspects than Company I. This shows that the performance of Company J’s management decisions has made it possible to maintain their financials healthy making them perform better than Company I in the same industry sector.

Beta Current Ratio Inventory Turnover Total Debt/Total Assets Net Profit Margin

Company K 1.00 1.63 3.89 25.21 8.17

Company L 1.00 1.77 3.59 14.45 3.39

In the tool industry both companies seem to have a 50/50 when looking at the highlighted area. But overall the company that has a better performance based on their ratios is Company K. In a profit point of view Company K outperforms Company L by 4.78% and their inventory turnover is slightly higher as well. They also seem to have the potential to pay off their debt since they are only .14x behind Company L.

Beta Current Ratio Inventory Turnover Total Debt/Total Assets Net Profit Margin

Company O .85 .88 33.35 15.22 12.65

Company P .90 .55 43.48 26.81 8.86

From the above data, our group has concluded that company O is healthier than company P. Company O is less risky and is more liquid than company P. Company O also has a better debt to assets ratio and net profit margin. From this, if we are investing in the newspaper industry, O is the better option.

Beta Current Ratio Inventory Turnover Total Debt/Total Assets Net Profit Margin

Company M .85 .90 7.69 26.16 3.59

Company N 1.10 1.69 5.86 29.54 4.02

Company M would be our group’s choice for the retail industry. The beta, inventory turnover, and total debt to asset ratio show the positive health of the company. Company is turnover of its inventory is relatively higher while being a less risky company when looking from a returns perspective. Also the company has some debt which means it is likely to grow, while company N has more debt and is a more risky company. Company M is a healthier company from looking at the above ratios.