Problem Two: Identify Industries
Below Are Selected Ratios for Three

question 28

Essay

Problem Two: Identify Industries
Below are selected ratios for three companies which operate in three different industries: Discount Retail Store, Drug and Utility. $$\begin{array}{l}\begin{array} { l c c c } \text { Industry } & \mathbf { A } & \mathbf { B } & \mathbf { C } \\\text { COGS/Sales } & 80 \% & 58 \% & \text { n/a } \\\text { R\&D/Sales } & 0 \% & 7 \% & 0.1 \% \\\text { Advertising/Sales } & \text { not defined } & 3 \% & 0.1 \% \\\text { Interest/Sales } & 0.9 \% & 1 \% & 6 \% \\\text { Net Income/Sales } & 2.5 \% & 10 \% & 10 \% \\\text { Return on Assets } & 8.5 \% & 10.6 \% & 7.2 \% \\\text { Inventory Turnover } & 5.5 & 4 & \mathbf { n } / \mathrm { a } \\\text { Accounts Receivable Turnover } & 100 & 6 & 9 \\\text { Long-term Debt/Equity } & 60 \% & 50 \% & 92 \%\end{array}\\\\\mathrm { n } / \mathbf { a } = \text { not applicable }\end{array}$$
Identify which industry each of the companies A, B and C operate in. Give two reasons for each of your selections.

---

Definitions:

Discounts

Reductions from the usual cost of goods or services, offered to customers to encourage purchase, clear inventory, or reward loyalty.

List Price Deductions

Discounts or reductions in the initial selling price of goods or services.

Everyday Low Pricing

A pricing strategy where a retailer consistently offers products at a low price rather than relying on sales or discounts.

Promotional Allowances

Financial incentives provided by manufacturers to retailers for the purpose of advertising or promoting specific products.