CASE STUDY
Profit margins and turnover ratios vary from one industry to another. What differences would you expect to find between a grocery chain such as Safeway and a steel company? Think particularly about the turnover ratios, the profit margin, and the Du Pont equation. How might (a) seasonal factors and (b) different growth rates distort a comparative ratio analysis? Give some examples. How might these problems be alleviated? Why is it sometimes misleading to compare a company's financial ratios with those of other firms that operate in the same industry?
Please use this strategy when you analyze a case:
1) Identify and write the main issues found discussed in the case (who, what, how, where and when (the critical facts in a case).
2) List all indicators (including stated "problems") that something is not as expected or as desired.
3) Briefly analyze the issue with theories found in your textbook or other academic materials. Decide which ideas, models, and theories seem useful. Apply these conceptual tools to the situation. As new information is revealed, cycle back to sub steps a and b.
4) Identify the areas that need improvement (use theories from your textbook)
-Specify and prioritize the criteria used to choose action alternatives.
-Discover or invent feasible action alternatives.
-Examine the probable consequences of action alternatives.
-Select a course of action.
-Design and implementation plan/schedule.
-Create a plan for assessing the action to be implemented.
5) Conclusion (every paper should end with a strong conclusion or summary)
BOOK NAME:- Ehrhardt M.C., Brigham E.F. Corporate finance (Thomson, 2003)(ISBN 0324180357)(O)(651s)_FA_