Fitch Learning Exercise

Three Retailers

Cash Conversion Cycle and Asset Efficiency

Assignment

Based on your understanding of the retail industry, consider how the asset structures of the three retail companies differ. Work in your groups and be prepared to respond to the following:
- Are the various asset configurations as you would expect, given your understanding of each company`s business?
- Explain how their different business mixes are reflected in their asset mix.
- Identify which of the three companies described corresponds to Company A, B, or C.

Assessing Profitability

Background
CHS operates in 46 countries and is the third largest distributor of computer products, including personal computers, peripherals, networking products and software. Although the company`s headquarters are located in the US, it operates exclusively outside of the US. Over the last four years the company has aggressively expanded its sales through both organic growth and acquisitions, with a focus on expansion into higher margin value-added businesses (distribution of mid-range computers, and assembly of personal computers). The company`s shares are trading on the NYSE and was recently included in the Fortune 500 list of America`s largest corporations (320th place).

Assignment
Using the five-year profit and loss data and the related ratios below, answer the following questions:
1. Understanding sector drivers: List 2 or 3 key factors which influence profitability for distributors of computer equipment.
2. Describe CHS` corporate strategy. Does it appear to be successful in operating its business and in integrating its acquisitions? How would you measure its success and support your conclusions?
3. What do you see as the 4 to 5 key risks to CHS`s future profitability?
4. What other data and/or ratios would you need to look at to assess the success of its strategies?