Introduction
In the analysis of this case, there are 14 companies that are identified under different sector in healthcare industry. An approach would be followed such as identification of service and trading company. The approach will also include the amount of expenditure on research and development expenses, amount of expenditure under sales, general and development expenses,and amount of depreciation and amortization.
Another key aspects through which companies can be identified are amount of inventory, net property, plant and equipment, intangible assets. Key ratios such as short term liquidity, long term liquidity, and profit margin and activity ratio help to assess the nature of the company and its sector.
Analysis of companies
Company A
Company A can be identified as operating in the service sector,as there is no inventory in the balance sheet and there is no inventory turnover ratio in days and also,there is no inventory. This is because services organizations do not maintain inventory.
Company A is not spending any amount on research and development therefore,it is not in a sector which is research based. However, there is no significant net property, plant and equipment. Ratios depict that Company A collects receivables in 13 days and maintains below average liquidity and it seems that the company operates in home care provider. Home care provider operate through a national network of home health care agencies. Agencies do not require heavy investment in property and plant and earn revenues mostly from commissions.As home care operates through health care agencies therefore,there is no considerable investment is required in research and marketing. Company A is earning 4% net profit as sales which can also be translate into net profit margin.
Company B
Company B can also be identified as operating in the service sector,as there is also no inventory in the balance sheet and there is no inventory turnover ratio in days,and also there is no inventory. This is because services organizations do not maintain inventory.
Company B is a highly liquid company as current ratio is 4.59 and cash ratio is 0.99 which are highest among other companies.Liquid assets are required in research and development expenses. Company B also spends 540% on research and development expenses, which indicates that it operates in the advance technology firm which is engaged in heavy research and development and it can be concluded that company B operates in the biotechnology sector.
Due to heavy research and development expenses, company B has made losses of 630% of revenue, these losses are temporary, when the entity will gain benefits and when products are successfully development on the basis of current research that is expenses in the income statement, later it will be capitalized.
Company C
Company C can also be identified as operating in the service sector,as there is also no inventory in the statement of financial position or balance sheet and there is no inventory turnover ratio in days and also,there is no inventory. This is because servicesorganization does notmaintain inventory.
Company C seems to operate in the community nursing sector as the trend shows that 55% of total assets is related to good will and hold 5% in net property plant and equipment.Community nursing sector doesn’t need heavy investment in property, plant and equipment and research and development.
The liquidity ratio of Company C is above average than other companies in the health care sector. Company C relieson equity capital and has zero debt element and receive average debts from debtors in 46 days.
By analyzing above trends it can be recommended that the company C operate in the community nursing sector.
Unidentified Healthcare Companies Case Solution
Company D
Company D can be identified as operating in the trading sector which trade in goods. As there is also inventory maintained in the balance sheet approx. 33% of total assets and there is the inventory turnover ratio of 33 days, therefore, the company D can be identified as operating in the trading sector of the healthcare industry.
Company D seems to be operating in the medical distribution company as it offers medical product and services and sells inventory in 33 days while collects receivables in 27 days. Revenue upon asset is also high by 3.86 which indicates it earns potential revenue on the asset base that could be possible in the case of company D. Company D holds 33% of its total assets in inventory.
It can be recommended that Company D operates in the medical distribution sector of healthcare.
Company E
Company E can also be identified as operating in the service sector,as there is also no inventory in the statement of financial position or balance sheet and there is no inventory turnover ratio in days due to no inventory.
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