Essay on Hbr Solution Unidentified Industries

The Case of the Unidentified Industries - 1995
Solution:
In order to find out the exact firm by analysing the financial structure of typical firms, first we need to separate those firms which have zero inventory turnover (A, B, F and H) from those firms which have zero debt ratio which in our case are (E, H and J) and we use the information to narrow down the possibilities of each firm. In this case there are three groups of companies: 1) Firms having zero inventory turnover. 2) Firms having zero debt. 3) Firms having all financial ratios given.
1) Firms having zero inventory turnover:
Under the category of zero inventories, there are four companies. The nature of these companies show that they are not involved in …show more content…
The result would be high cash which keeps the liquidity position of the company good and adds more value to the firm. This is the reason these companies are called cash cows. One of the best examples is ‘Microsoft’. Furthermore these softwares have meaningless depreciation due to which they work for many years. In order to become more profitable the firms constantly research on existing software and generate mere cash.

3) Firms having all financial ratios given:
Under the category this firm there are five firms. A food chain has a considerably higher turnover than does an electric utility. The turnover ratio is a function of the efficiency with which the various asset components are managed, receivables as depicted by the average collection period, inventories as portrayed by the inventory turnover ratio, and fixed assets as indicated by the throughput of product through the plant or the sales to net fixed asset ratio.
Firm C. Electric and Gas Utility:
A huge investment in fixed asset shows that this firm ‘C’ gets its series of cash flow using fixed asset investment. Further that this company has a high debt ratio and high receivables collection period which reflects that the company is receiving cash in a longer period of time due to which the firm needs to finance most of its expenses by using debt. That

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