CASE 8-7 NAME THE INDUSTRY With this case, a comparison is made between three fi

Question

CASE 8-7 NAME THE INDUSTRY With this case, a comparison is made between three firms in different industries using net profit margin, total asset turnover and current ratio. 1. Apple Fiscal year 2010 ended September 25, 2010, and consisted of 52 weeks ''Apple, Inc. and its wholly-owned subsidiaries (collectively ''Apple'' or the ?Company'') designs, manufactures and markets a range of personal computers, mobile communication and media devices, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.'' 10-K 2. Costco Wholesale Corporation Fiscal year ended August 29, 2010, and consisted of 52 weeks ''We operate membership warehouses based on the concept that offering our members low prices on a limited selection of nationally branded and selected private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover.'' 10-K 3. Target Corporation Fiscal year 2010 ended January 29, 2011, and consisted of 52 weeks ''Our Retail Segment includes all of our merchandising operations, including our fully integrated online business. We offer everyday essentials and fashionable, differentiated merchandise al discounted prices.'' 10-K Required a. Which firm is Firm A? Comment on your reasons. b. Which firm is Firm B? Comment on your reasons. c. Which firm is Firm C? Comment on your reasons.

Explanation / Answer

Ans

Details Firm A Firm B Firm C Net Profit Margin 2% 21.48% 4.44% Total Assets Turnover                                                                                     3.40 1.06 1.49 Current Ratio                                                                                     1.16 2.01 1.71 Firm Target Corporation Apple Costco Whole sale corporation Industry Retail Design and Manufacturing Wholesale -membership ware houses Reason 1 Huge sales volume -Charectrised by high Asset turnover ratio Highest Net Margin - Value addition by the intermediate process is the highest. Margin is higher compared to Retail because of the high value product it dealing with. Reason 1 Lowest Net Margin %- Retail industry earns the lowest net margin % on higher volume. Lowest Asset turnover ratio-Huge investment in manufacturing facilities Reason 3 Working capital is the lowest-Since no intermediate process between buying and selling Highest Current ration-Money blocked in intermediary mfg process.

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