Financial ratios: industry differences Certain industries have distinctive economic traits and these can be seen in the financial statements of companies in the industry. Set out in Exhibit 19.18 are summary accounts of seven companies from seven different industries. In each case, numbers from the balance sheets and income statements of the three years to 2001 are averaged and then common-sized on net sales (i.e. expressed as a percentage of net sales).

Required Match each company in the exhibit to one of the industries below. Give reasons for your choice.

1 Applications software development and production 2 Brandy distilling 3 Department store retailing 4 Drugs development and manufacture 5 Electricity generation and distribution 6 Supermarket retailing 7 Scheduled international air transport The seven companies come from seven different countries. They do not all use the same accounting methods. Profitability ratios may be affected. However, industry differences in cost structure, activity ratios and financing should still be evident in the seven companies’ accounts.

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