Drivers of Industry Financial Structure

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Drivers of Industry Financial Structure

A. Online Retailer:

- Low Net Plant & Equipment: An online retailer will not have a huge facility as compared to a manufacturer. It will have at most an office building and a warehouse to stockpile some inventory of its own.
- No Receivables/Days of Receivables: Since an online retailer caters to only individual customers, and since the latter pays usually by cash or credit card, accounts receivable will be at most a negligible amount, if not zero.
- Unearned Revenues: Unearned Revenues can exist for an online retailer especially when the company opens up pre-order accounts for various products which are not yet released in the market.
- Research & Development: An online retailer can have an …show more content…

- Low Net Income/Sales: Although the R&D expenditure is high, the product development cycle for this industry is less as compared to Pharmaceuticals. Hence there can be many companies in the market with similar (and cheaper) products. So the Net Income/Sales figure is affected due to this fact.
- High Days of Receivables: Similar reason like that of the pharmaceuticals company.

H. Warehouse Club for Food and General Merchandise:

- High Inventory: Just like the Supermarket Grocery, a Warehouse Club also needs to have a high inventory for similar reasons.
- Low Days of Receivables: Similar to all retailers.
- No R&D: Sells products of different manufacturers. Hence no R&D expense incurred.
- Low Gross Margin: Gross margin is low because products are sold at a lesser price per unit.
- Net Income/Sales: This figure is higher than that of the Supermarket, because goods are sold in bulk by this company.

I. Temporary Staffing Agency:

- High Accounts Receivables: As a staffing agency earns its revenues through salary commissions (or 1 2 months of wages per employee provided), the bulk of its revenues are not immediately realized. Hence, this figure is high on the balance sheet.
- No Inventory: Obvious reason.
- No R&D: Again for obvious reasons.
- High Days of Receivables: For the reason outlined above, this

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