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Chapter ! 1 . 7 Effect of Industry Economics on Balance Sheets Access the investor relations or corporate information section of the websites of American Airlines ( www . 2a . com ) , Intel ( www . intel . com ) , and Disney ( http : "/ disney . com ) . Study the business strategies of each firm . Examine the financial* ratios below and indicate which firm is likely to be American Airlines , Intel , and Disney . Explain your reasoning .* Firm A* Firm B Property , plant and equipmentiassets* 27.9%\\ B Firm C 62.5% Long-term debtiassets\\ 18 . 2 % 34.6 %/ 3. 7% 35 . 7 % Firm A Firm B Firm C Exhibit 1 . 18 represents common - size income statements and balance sheets for seven firms that operate at various* stages in the value chain for the pharmaceutical industry . These common- size statements express all amounts as a percentage of sales revenue . Exhibit 1. 18 also shows the cash flow from operations to capital expenditures ratios for each firm . A dash for a particular financial statement item does not necessarily mean the amount is zero . It merely* indicates that the amount is not sufficiently large for the firm to disclose it . A list of the seven companies and a brief* description of their activities follow .* 1. Wyeth* Engages in the development , manufacture , and sale of ethical drugs ( that is , drugs requiring a prescription ) . Wyeth's* drugs represent primarily mixtures of chemical compounds . Ethical- drug companies must obtain approval of new drugs from the U.S . Food and Drug Administration ( FDA ) . Patents protect such drugs from competition until other drug* companies develop more effective substitutes or the patent expires .\\ \\Choose 1 - 7 based on the common - size financial statement data in Exhibit 1. 18 .` B. Amgen Engages in the development , manufacture , and sale of drugs based on biotechnology research . Biotechnology drugs* must obtain approval from the FDA and enjoy patent protection similar to that for chemical - based drugs . The* biotechnology segment is less mature than the ethical - drug industry , with relatively Few products having received FDA approval ." \\Choose 1 - 7 based on the common- size financial statement data in Exhibit 1 . 18 .\\ ` Mylan Laboratories\\ Engages in the development , manufacture , and sale of generic drugs . Generic drugs have the same chemical* compositions as drugs that had previously benefited from patent protection but for which the patent has expired Generic drug companies have benefited in recent years from the patent expiration of several major ethical drugs . However , the major ethical - drug companies have increasingly offered generic versions of their ethical drugs to compete against the generic- drug companies .* \\ Choose 1 - 7 based on the common -size financial statement data in Exhibit 1 . 18 . D. Johnson & Johnson* Engages in the development , manufacture , and sale of over - the-counter healthcare products . Such products do not require a prescription and often benefit from brand recognition ." \\ Choose 1 - 7 based on the common-size financial statement data in Exhibit 1 . 18 . E. Covance\\ Offers product development and laboratory testing services for biotechnology and pharmaceutical drugs . It also offers commercialization services and market access services . Cost of goods sold for this company represents the salaries of personnel conducting the laboratory testing and drug approval services ." \\ Choose 1 - 7 based on the common-size financial statement data in Exhibit 1 . 18 . F. Cardinal Health* Distributes drugs as a wholesaler to drugstores , hospitals , and mass merchandisers . Also offers pharmaceutical benefit management services in which it provides customized databases designed to help customers order more efficiently . contain costs , and monitor their purchases . Cost of goods sold for Cardinal Health includes the cost of drugs sold plus the salaries of personnel providing pharmaceutical benefits .\\ \\ Choose 1 - 7 based on the common-size financial statement data in Exhibit 1. 18 .` G. Walgreens Operates a chain of drugstores nationwide . The data in Exhibit 1 . 18 for Walgreens include the recognition of operating* lease commitments for retail space .\\ \\ Choose 1 - 7 based on the common-size financial statement data in Exhibit 1 . 18 Use this space to support your
