The nine companies contained in MS Excel file are drawn from the following nine industries:

(i) Aerospace (airplane manufacturer)

(ii) Airline

(iii) Chemical & pharmaceutical

(iv) Computer software

(v) Consumer foods

(vi) Department store

(vii) Consumer finance (consumer commercial bank)

(viii) Newspaper publishing

(ix) Electrical utility

Company	1	2	3	4	5	6	7	8	9
Cash & short-term. invest.	2%	13%	37%	1%	1%	3%	1%	22%	6%
A/R	17%	8%	22%	28%	23%	5%	11%	16%	8%
Inventory	15%	52%	15%	23%	14%	2%	2%	0%	5%
Other current assets	6%	0%	5%	1%	4%	2%	2%	1%	0%
Total current assets	40%	73%	79%	53%	42%	12%	16%	39%	19%
PPE (gross)	86%	40%	26%	44%	63%	112%	65%	1%	106%
Less: acc. Depre.	-50%	-19%	-8%	-15%	-23%	-45%	-28%	0%	-34%
Investments	3%	1%	0%	0%	3%	14%	16%	55%	0%
Intangibles	21%	5%	3%	18%	15%	7%	31%	5%	9%
Total assets	100%	100%	100%	100%	100%	100%	100%	100%	100%
Trade payable	11%	21%	22%	13%	26%	7%	11%	n/a	20%
Debt payable	4%	0%	3%	6%	4%	6%	2%	46%	4%
Other current liab.	9%	43%	0%	0%	1%	4%	1%	16%	8%
Total curr. liab.	24%	64%	25%	19%	31%	17%	14%	62%	32%
LT debt	20%	5%	12%	27%	23%	34%	24%	27%	21%
Other liab.	16%	0%	1%	21%	16%	12%	13%	5%	12%
Total liab.	60%	69%	38%	67%	70%	63%	51%	94%	65%
Equity	40%	31%	62%	33%	30%	37%	49%	6%	35%
Total liab. & equity	100%	100%	100%	100%	100%	100%	100%	100%	100%
Common-size I/S
Company	1	2	3	4	5	6	7	8	9
Sales	100%	100%	100%	100%	100%	100%	100%	100%	100%
COGS	58%	81%	58%	63%	52%	0%	59%	0%	0%
Operating expense	21%	7%	24%	28%	33%	84%	29%	55%	91%
R&D	7%	5%	9%	0%	1%	n/a	0%	0%	0%
Advertising	3%	0%	3%	2%	5%	n/a	n/a	0%	2%
Operating income	11%	7%	6%	7%	9%	16%	12%	45%	7%
Net interest expense	1%	-1%	0%	2%	2%	6%	3%	41%	1%
Icome before tax	10%	8%	6%	5%	7%	10%	9%	4%	6%

Required:

a. Based on the common-size financial statements (available in separate Excel sheet), match each company to its industry. (Hint 1: Try to find the obvious one first. For example, company 8 must be in consumer finance industry, since the company has high level of cash, short-term debt payable & interest expenses relative to revenue, with no trade payable, no cost of sales, no R&D, and no advertising expenses); (Hint 2: For electrical utility industry, consider hydraulic electrical company that has no cost of goods sold); (Hint 3: I would try to group the companies by specific characteristics like high R&D, zero COGS, etc.)

b. Briefly discuss the balance sheet and income statement characteristics that enabled you to identify the industry to which each company belonged. Keep in mind that these common-size financial statements are not from most recent years. In other words, try to identify the particular characteristics of each industry like R&D, advertising, PPE, etc.