1) The table below contains the financial results for Amazon.

com, Nordstrom, Walmart and

Macy’s for end of year 2012.

a) Calculate all relevant financial performance metrics discussed: ROA, ROE, gross margin%,
profit margin%, EBIT%, Asset Turnovers, PPET, DSO, DPO, INVT, DOI, CCC and ROCE.

b) Which metrics does each company perform better on? Can you explain the differences you
see in their performance based on their supply chain strategy and structure?

Performance Metrics Formula

Profitability
ROA Net_Income / Total_Assets
ROE Net_Income / Total_Equity(StakeHolder Equity)
Gross Margin % (Gross Profit/Net Operating Revenues)*100
EBIT EBIT=Operating Income+Other Income (Loss)
EBIT % (EBIT / Net Operating Revenues) * 100
Profit Margin % Net_Income / Revenue * 100
ROCE EBIT / (Capital Employed)

Capital/Asset Performance
Asset Turnover Revenue / Total_Assets
PPET Revenue / PPE_Assets (Property, plant and equipm
APT (Accounts Payable Turnover) COGS / Accounts_Payable
ART (Accounts Receivable Turnover) Revenue / Accounts_Receivable(Net Receivables)
INVT (Inventory Turnover) COGS / Inventory
DPO (Days Payable Outstanding) (Accounts_Payable / COGS) * 365
DSO (Days Sales Outstanding) (Accounts_Receivable / Revenue) * 365
DOI (Days of Inventory) (Inventory / COGS) * 365
CCC (Cash Conversion Cycle) -DPO + DOI + DSO

b) Which metrics does each company perform better on? Can you explain the differences you
see in their performance based on their supply chain strategy and structure?
Asset Utilization:
Walmart: Best overall with the highest Asset Turnover and Inventory Turnover due to being a high-volume, low-
it has low Fixed Asset Turnover because of many facilities/warehouses.
Amazon.com: Second-best with the highest Fixed Asset Turnover and second-best Inventory Turnover. This is du
leading to efficient asset and inventory use.
Nordstrom: Intermediate in both Inventory Turnover (INVT) and Property, Plant, and Equipment Turnover (PPET
Macy's: Worst in both INVT and PPET, attributed to high uncertainty in inventory and a large number of facilities.
Profitability:
Macy’s and Nordstrom: Best in generating value relative to the cost of goods sold due to strong brand recognitio
Walmart: Best overall with the highest Asset Turnover and Inventory Turnover due to being a high-volume, low-
it has low Fixed Asset Turnover because of many facilities/warehouses.
Amazon.com: Second-best with the highest Fixed Asset Turnover and second-best Inventory Turnover. This is du
leading to efficient asset and inventory use.
Nordstrom: Intermediate in both Inventory Turnover (INVT) and Property, Plant, and Equipment Turnover (PPET
Macy's: Worst in both INVT and PPET, attributed to high uncertainty in inventory and a large number of facilities.
Profitability:
Macy’s and Nordstrom: Best in generating value relative to the cost of goods sold due to strong brand recognitio
Margin.
Walmart: Surprises with good EBIT%, despite lower Gross Margin, due to efficient operational management.
Amazon.com: Performs poorly in EBIT% due to high operating expenses linked to emphasis on fast delivery, custo
return policies.
Return Metrics (ROE & ROCE):
Similar performance patterns observed as profitability.
Walmart: Better than Macy’s in ROCE because of higher asset efficiency relative to sales revenue.
Cash Flow Performance:
Walmart: Strong due to better inventory turnover, reducing cash tied up in unsold goods.
Amazon.com: Excels with high INVT and best Accounts Payable Turnover (APT), though struggles with long colle
Receivable Turnover (ART)).
Nordstrom: Poor cash flow due to low ART (slow to collect payments) and short APT (quick to pay debts), impacti
Cycle (CCC).
 Category
Net operating revenues

Cost of goods sold

Revenues=Net Operating Revenues Gross profit
Capital Employed=Total Assets−Total Current Liabilities SG&A expenses
Capital Employed=Stockholder Equity+Non-Current Liabilities Operating income
Other income (loss) - net
Income before interest & taxes
Interest expense
Amazon Nordstorm Walmart Macy's Income taxes
0.68% 9.09% 8.74% 7.08% Net income
2.81% 38.42% 21.72% 24.56% Cash and cash equivalents
27.23% 38.82% 24.87% 40.12% Net receivables
647.00 1345.00 27988.00 2678.00
0.87% 11.07% 5.97% 9.59% Inventories
0.37% 6.05% 3.78% 5.32% Other current assets
3.77% 22.94% 21.32% 16.83% Total current assets
Property, plant and equipment
Goodwill
1.85 1.50 2.31 1.33 Other assets
6.80 4.71 4.02 3.41 Total assets
2.48 7.35 5.96 3.38
15.62 5.71 69.32 75.29
7.31 5.46 8.05 3.15 Accounts payable
147.00 49.65 61.20 108.05
23.37 63.97 5.27 4.85 Short-term debt
49.93 66.79 45.36 115.84 Other current liabilities
-73.71 81.11 -10.57 12.64 Total current liabilities
Long-term debt
Other liabilities
Total liabilities
Stockholder equity
Other liabilities
ver due to being a high-volume, low-uncertainty retailer. However, Total liabilities
Stockholder equity
nd-best Inventory Turnover. This is due to fewer physical facilities,
Plant, and Equipment Turnover (PPET). Profitability Metrics
tory and a large number of facilities. ROA (Return on Assets): High is better – shows effi
ROE (Return on Equity): High is better – indicates
Gross Margin %: High is better – reflects the abilit
s sold due to strong brand recognition, reflected in higher Gross EBIT (Earnings Before Interest and Taxes): High is
EBIT %: High is better – indicates operational effic
ver due to being a high-volume, low-uncertainty retailer. However,
nd-best Inventory Turnover. This is due to fewer physical facilities,
Plant, and Equipment Turnover (PPET). Profitability Metrics
tory and a large number of facilities. ROA (Return on Assets): High is better – shows effi
ROE (Return on Equity): High is better – indicates
Gross Margin %: High is better – reflects the abilit
s sold due to strong brand recognition, reflected in higher Gross EBIT (Earnings Before Interest and Taxes): High is
EBIT %: High is better – indicates operational effic
fficient operational management. Profit Margin %: High is better – reflects overall p
ed to emphasis on fast delivery, customer service, and flexible ROCE (Return on Capital Employed): High is bette
Capital/Asset Performance Metrics
Asset Turnover: High is better – signifies efficient
PPET (Property, Plant, and Equipment Turnover):
tive to sales revenue. APT (Accounts Payable Turnover): High is better –
ART (Accounts Receivable Turnover): High is bett
INVT (Inventory Turnover): High is better – reflec
unsold goods. DPO (Days Payable Outstanding): High is better –
PT), though struggles with long collection times (Accounts DSO (Days Sales Outstanding): Low is better – qu
DOI (Days of Inventory): Low is better – shorter in
hort APT (quick to pay debts), impacting overall Cash Conversion CCC (Cash Conversion Cycle): Low is better – a sh
 Amazon.comNordstrom Walmart Macy's
74452.00 12,148 469,162 27,931

54,181 7,432 352,488 16,725

20,271 4,716 116,674 11,206
19,526 3,371 88,873 8,528
745 1,345 27,801 2,678
-98 0 187 0
647 1,345 27,988 2,678
141 160 2,251 388
232 450 7,981 804
274 735 17,756 1,486
8,658 1,285 7,781 1,836
4,767 2,129 6,768 371

7,411 1,360 43,803 5,308

3,789 307 1,588 361
24,625 5,081 59,940 7,876
10,949 2,579 116,681 8,196
2,655 175 20,497 3,743
1,930 254 5,987 1,176
40,159 8,089 203,105 20,991

21,821 1,011 59,099 4,951

- 7 12,719 124
1,159 1,208 - -
22,980 2,226 71,818 5,075
3,191 3,124 41,417 6,806
4,242 826 8,132 3,059
30,413 6,176 121,367 14,940
9,746 1,913 81,738 6,051
4,242 826 8,132 3,059
30,413 6,176 121,367 14,940
9,746 1,913 81,738 6,051

: High is better – shows efficient use of assets to generate profits.

High is better – indicates how well a company generates profit from shareholders' equity.
better – reflects the ability to control production costs and maintain profitability.
terest and Taxes): High is better – shows strong core profitability from operations.
indicates operational efficiency, showing how well earnings cover operating costs.
: High is better – shows efficient use of assets to generate profits.
High is better – indicates how well a company generates profit from shareholders' equity.
better – reflects the ability to control production costs and maintain profitability.
terest and Taxes): High is better – shows strong core profitability from operations.
indicates operational efficiency, showing how well earnings cover operating costs.
better – reflects overall profitability after all expenses.
l Employed): High is better – measures how effectively capital is utilized to generate profits.
nce Metrics
better – signifies efficient use of assets to generate revenue.
nd Equipment Turnover): High is better – indicates efficient use of fixed assets.
Turnover): High is better – shows ability to delay payments, managing cash flow effectively.
le Turnover): High is better – indicates how quickly a company collects payments from sales.
er): High is better – reflects how efficiently inventory is managed and sold.
standing): High is better – longer payment periods can improve cash flow management.
nding): Low is better – quicker collection of receivables enhances cash flow.
: Low is better – shorter inventory periods suggest efficient sales and stock management.
ycle): Low is better – a shorter cycle indicates faster conversion of investments into cash.
 2) Consider the financial statement of a specialty retail company given in the table below, along with th
a) Calculate all relevant financial performance metrics for this company for both years.
b) Interpret the calculated metrics to evaluate the company’s performance

Performance Metrics Formula

ROCE EBIT / Capital Employed
ROE Net Income / Shareholder Equity(TOTAL EQUITY)
Gross Margin % Gross Margin / Sales Revenue(Net Sales)
EBIT % EBIT / Sales Revenue
PPET Sales Revenue / PP&E Assets
DOI (Inventories / COGS) * 365
DPO (Acc. Payable / COGS) * 365
DSO (Acc. Receivable / Sales Revenue) * 365
CCC -DPO + DOI + DSO

Gross Margin=Net Sales−Cost of Goods Sold

Sales Revenue = Net Sales
b)Interpret the calculated metrics to evaluate the company’s performance year-to-year, and with respect to the ind
Metric Industry Statistics
Upper Quartile
ROCE 26.80%
ROE 17.20%
Gross Margin % 31.75%
EBIT % 2.05%
PPET 15.9
DOI 76
DPO 41.4
DSO 39.1
CCC 70.3
şirketin hangi quartile a düştüüne bakıp iyi bir durumda olup olmadığını algılayabilirsin

**If a company's metrics are closer to or exceed the Upper Quartile values, it's considered a strong performer com
industry.
ROCE: Company's ROCE has improved from 2017 to 2018 however, it still falls in the lower quartile within industry statistcs. M
doing very well.

ROE: Similarly, there is improvement in Return on Equity from 2017 to 2018 but the company is below the industry median a
in comparison.

Gross Margin %: Company’s gross margin % has gone down a bit from 2017 to 2018 but still it’s doing close to the industry u
meaning it’s doing very well.

EBIT%: Company has improved in EBIT % from 2017 to 2018 and it’s doing quite well when compared to the industry, placing
(but below the upper quartile).

PPET:
The company performs well in Fixed Asset Turnover (PPET), exceeding the industry median and improving from 20
Strong fixed asset use suggests weaknesses in current asset and debt management, hinting at inefficiencies in tho
DOI (Days of Inventory):
Gross Margin %: Company’s gross margin % has gone down a bit from 2017 to 2018 but still it’s doing close to the industry u
meaning it’s doing very well.

EBIT%: Company has improved in EBIT % from 2017 to 2018 and it’s doing quite well when compared to the industry, placing
(but below the upper quartile).

PPET:
The company performs well in Fixed Asset Turnover (PPET), exceeding the industry median and improving from 20
Strong fixed asset use suggests weaknesses in current asset and debt management, hinting at inefficiencies in tho
DOI (Days of Inventory):
High DOI (low INVT) indicates poor inventory utilization, worsening from 2017 to 2018 and below industry median
A specialty retailer position with uncertain demand requires high safety stock, explaining the high DOI.
DPO (Days Payable Outstanding):
High DPO (low APT) means the company is delaying payments to suppliers, financing operations longer with suppl
The company’s DPO increased from 2017 to 2018, significantly above the industry upper quartile, aiding cash flow
inventory issues.
DSO (Days Sales Outstanding):
Low DSO (high ART) shows quick receivables collection, outperforming the industry and improving from 2017 to 2
This boosts liquidity despite weaknesses in inventory management.
CCC (Cash Conversion Cycle):
A short CCC is favorable. The company maintains a stable and low CCC, performing well relative to the industry.
Despite a high DOI, a high DPO and low DSO create a balanced cash flow, reflecting good management of receivab

=
ven in the table below, along with the industry statistical information on some financial performance metrics.

aluate the company’s performance year-to-year, and with respect to the industry.

All Values in $000s

2018 2017 INCOME STATEMENT
17.11% 14.84% Net Sales
5.62% 3.55% Cost of Goods Sold
30% 32.6% Operating Expenses
1.63% 1.58% Depreciation
14.29 12.71 EARNING BEFORE INTEREST AND TAXES
67.8 53.5 Interest
52.14 42.77 EARNINGS BEFORE TAXES
11.0 15.8 Taxes
26.6 26.4 NET INCOME
ASSETS
Cash and Market Securities
Accounts Receivable
year, and with respect to the industry. Inventory
CURRENT ASSETS
Median Lower Quartile Property, Plant, and Equipment
21.30% 15.66% Other Assets
10.70% 2.10% LONG TERM ASSETS
20.60% 9.54% TOTAL ASSETS
1.22% 0.58% LIABILITIES
11.2 7.5 Short-Term Debt
47.4 24.5 Current Portion of Long-Term Debt
32.5 24.1 Accounts Payable
29 24.3 Accrued Liabilities
43.6 21.9 CURRENT LIABILITIES
LONG-TERM DEBT
TOTAL LIABILITIES
nsidered a strong performer compared to the TOTAL EQUITY

r quartile within industry statistcs. Meaning it's not ROCE (Return on Capital Employed):
High: Effective use of capital to generate profits.
Low: Poor capital efficiency, needing better asset utilization.
pany is below the industry median and not doing well ROE (Return on Equity):
High: Good profitability for shareholders.
Low: Inefficient use of equity to generate returns.
till it’s doing close to the industry upper quartile, Gross Margin %:
High: Strong control over production costs and good pricing power.
Low: Higher costs relative to sales, indicating weaker profitability.
en compared to the industry, placing above the median EBIT % (Operating Profit Margin):
High: Efficient operations with strong core profitability.
Low: Higher operating costs, reducing earnings efficiency.
ry median and improving from 2017 to 2018. PPET (Property, Plant, and Equipment Turnover):
nt, hinting at inefficiencies in those areas. High: Efficient use of fixed assets to generate revenue.
Low: Underutilization of assets, indicating potential inefficiency.
till it’s doing close to the industry upper quartile, Gross Margin %:
High: Strong control over production costs and good pricing power.
Low: Higher costs relative to sales, indicating weaker profitability.
en compared to the industry, placing above the median EBIT % (Operating Profit Margin):
High: Efficient operations with strong core profitability.
Low: Higher operating costs, reducing earnings efficiency.
ry median and improving from 2017 to 2018. PPET (Property, Plant, and Equipment Turnover):
nt, hinting at inefficiencies in those areas. High: Efficient use of fixed assets to generate revenue.
Low: Underutilization of assets, indicating potential inefficiency.
2018 and below industry median. DOI (Days of Inventory):
plaining the high DOI. High: Slower inventory turnover, leading to capital being tied up.
Low: Faster inventory movement, improving cash flow efficiency.
ing operations longer with supplier funds. DPO (Days Payable Outstanding):
PPETLonger
High: (Property,
time Plant,
to pay and Equipment
suppliers, Turnover):
potentially improving cash flow.
upper quartile, aiding cash flow but indicating High PPET indicates strong fixed asset utilization. If other metrics
Low: Quick supplier payments, possibly reducing negotiation flexibil
investigate current assets.
DSO (Days Sales Outstanding):
DOISlow
High: (Dayscollection
of Inventory) and INVT (Inventory
of receivables, Turnovers):
indicating cash flow delays.
ry and improving from 2017 to 2018.
Low: Faster collection of receivables, improving turnover,
High DOI (low INVT) indicates slow inventory liquidity. tying up ca
managing
CCC DSO and DPO
(Cash Conversion effectively to maintain cash flow.
Cycle):
DPO (Days Payable Outstanding)
High: Longer time to convert investmentsand APTback(Accounts
into cash.Payable Turn
g well relative to the industry.
ng good management of receivables and payables. Low: Quick cash cycle, enhancing operational efficiency. aiding ca
High DPO (low APT) means delaying supplier payments,
with DSO to maintain a healthy CCC.
DSO (Days Sales Outstanding) and ART (Accounts Receivable Tur
Low DSO (high ART) means faster receivables collection, improvin
counterbalance a high DOI in cash flow performance.
CCC (Cash Conversion Cycle):
Combines DOI, DPO, and DSO. A low CCC is ideal, indicating efficie
even if individual components vary.
s.

2018 2017

40,000 38,000
28,000 25,600
11,000 11,330
350 470
650 600
480 465
170 135
68 64
102 71

600 930
1,200 1,640
5,200 3,750
7,000 6,320
2,800 2,990
600 690
3,400 3,680
10,400 10,000

1,270 1,500
450 500
4,000 3,000
800 958
6,600 5,958
1,985 2,042
8,585 8,000
1,815 2,000

e profits.
tter asset utilization.
s.
te returns.
sts and good pricing power.
ating weaker profitability.
ore profitability.
arnings efficiency.
Turnover):
erate revenue.
ng potential inefficiency.
 sts and good pricing power.
ating weaker profitability.
ore profitability.
arnings efficiency.
Turnover):
erate revenue.
ng potential inefficiency.
g to capital being tied up.
oving cash flow efficiency.
t Turnover):
entially improving cash flow.
utilization.
reducing If other metrics
negotiation like DOI are weak,
flexibility.
ventory Turnovers):
icating cash flow delays.
mproving turnover,
ventory liquidity. tying up capital. Compensate by
maintain cash flow.
APT (Accounts
ts back into cash.Payable Turnovers):
supplier
tional efficiency. aiding cash flow. Balance this
payments,
RT (Accounts Receivable Turnovers):
eivables collection, improving liquidity. Can
w performance.
CCC is ideal, indicating efficient cash management
 a)
1st step: look at the balance sheet roughly and see if some numbers are outstanding. in this
case we see that Eczacıbaşı has much higher total assets (4million) and Total Shareholders
Equity(5m).
2) CALCULATE D/E RATIO: TOTAL liabilities / Total Shareholders Equity

D/E RATIO Nobel İlaç Eczacıbaşı Deva Holding

2.07 0.13 1.06

ECZACIBAŞI
The very low D/E ratio of 0.13 indicates minimal use of debt, demonstrating a conservative approach to financing
A D/E ratio of 0.13 shows Eczacibasi’s preference for financing through shareholder’s equity rather than taking o
enhances their ability to secure credit when needed, as lenders would perceive them as a low-risk entity. It also b
credibility, potentially allowing them to negotiate favorable terms with suppliers.

The downside is that this cautious approach might limit their growth opportunities, as they are not utilizing borro
aggressively, which could potentially lead to higher returns if managed well.
PP&E (Property, Plant, and Equipment) are tangible, operational assets used for production (e.g., buildings, mac
We saw that Eczacibasi's assets were largely in long-term financial investments (3,358,248) rather than PP&E (3
(88,567). This tells us they prioritize financial assets over operational ones, signaling a focus on financial stability
growth.
In the case of Eczacibasi, we can see that much of these disproportionately large assets are in fact invested in long term fin
investing in assets that enable value-creation (PP&E and Inventories). This also explains the disproportionately high “invest
statement of income (right after “operating income” line). In short, Eczacibasi has evolved into more of a financial investme
pharmaceutical company.

Deva Holding and Nobel İlaç

Where to Look: Check the "Total Assets" and "Total Shareholder’s Equity"Deva Holding has larger current and to
compared to Nobel İlaç (1,366,719).Deva also has more equity (1,030,842 vs. 445,287), indicating stronger finan
shareholders.Conclusion: Deva Holding’s larger total assets and higher equity indicate a stronger financial base a
compared to Nobel. This suggests Deva is better positioned for stability and long-term growth with solid shareho
2. Compare Financial Leverage (D/E Ratio)
Conclusion: Nobel’s high D/E ratio (2.07) shows a heavy reliance on debt, making it a high-risk company focused
contrast, Deva’s more balanced D/E ratio (1.06) reflects a lower-risk strategy, managing debt and equity in a mor
Findings:Nobel has 325,846 in PP&E, suggesting investment in facilities or R&D to boost growth.
Nobel's Accounts Receivable is high (621,734), indicating they’re giving buyers very lenient payment terms, poss
quickly. This could be risky if they can’t collect the money.
3.Deva has a balanced investment in PP&E (503,183) proportionate to its size, indicating a focus on steady produ
Nobel’s substantial investment in PP&E suggests a focus on expanding production capabilities, potentially for R&
Receivable is a red flag, indicating they might be too lenient with credit terms to increase sales. Deva’s more bala
shows a steady production strategy without excessive risk.
Findings:Nobel has 325,846 in PP&E, suggesting investment in facilities or R&D to boost growth.
Nobel's Accounts Receivable is high (621,734), indicating they’re giving buyers very lenient payment terms, poss
quickly. This could be risky if they can’t collect the money.
3.Deva has a balanced investment in PP&E (503,183) proportionate to its size, indicating a focus on steady produ
Nobel’s substantial investment in PP&E suggests a focus on expanding production capabilities, potentially for R&
Receivable is a red flag, indicating they might be too lenient with credit terms to increase sales. Deva’s more bala
shows a steady production strategy without excessive risk.
4. Cost Structure and Profitability:
Where to Look: Check the Income Statement for Sales Revenue, Gross Profit, and Expenses.
Findings:
Sales figures for both companies are similar, but Deva has higher Gross Profit (719,159 vs. 633,206 for Nobel), sh
turning sales into profit.
Nobel’s high marketing expenses (332,665) reflect an aggressive strategy to gain market share, supporting their
Deva is focused on product availability with significant Inventories (430,763), showing they prioritize market pres
Conclusion: Deva is more profitable despite similar sales figures because of higher Gross Profit margins, showing
Nobel’s heavy marketing spending aligns with a risky market share expansion strategy, while Deva focuses on con
favoring stable market operations over aggressive growth.
 Category
BALANCE SHEET
CURRENT ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories
Prepaid Expenses
are outstanding. in this
nd Total Shareholders Other Current Assets
Total Current Assets
y NON-CURRENT ASSETS
Financial Investments
Other Receivables
Property, Plant and Equipment
Intangible Assets and Goodwill
Prepaid Expenses
Deferred Tax Asset
Other Non-Current Assets
Total Non-Current Assets
servative approach to financing. Total Assets
er’s equity rather than taking on debt.This low leverage CURRENT LIABILITIES
em as a low-risk entity. It also boosts their financial Current Borrowings
Current Portion of Non-Current Borrowings
s, as they are not utilizing borrowed funds to expand Accounts Payable
Employee Benefit Obligations
production (e.g., buildings, machinery). Other Payables
3,358,248) rather than PP&E (351,340) or Inventories Deferred Income Other Than Contract Liabilities
ng a focus on financial stability instead of production Current Tax Liabilities, Current
Current Provisions
re in fact invested in long term financial instruments, instead of Other Current Liabilities
he disproportionately high “investment” related items in the Total Current Liabilities
d into more of a financial investments company than a
NON-CURRENT LIABILITIES
Long Term Borrowings
olding has larger current and total assets (2,119,502) Other Payables
,287), indicating stronger financial backing from Non-Current Provisions
cate a stronger financial base and greater market presence Deferred Tax Liabilities
term growth with solid shareholder support Total Non-Current Liabilities
Total Liabilities
it a high-risk company focused on aggressive growth. In Total Shareholders’ Equity
aging debt and equity in a more controlled way. STATEMENT OF INCOME
boost growth.
ry lenient payment terms, possibly to capture market share Sales Revenue
Cost of Sales
GROSS PROFIT
icating a focus on steady production capacity.Conclusion:
capabilities, potentially for R&D. However, high Accounts
ncrease sales. Deva’s more balanced PP&E investment
 boost growth.
ry lenient payment terms, possibly to capture market share

icating a focus on steady production capacity.Conclusion:

capabilities, potentially for R&D. However, high Accounts General Administrative Expenses
ncrease sales. Deva’s more balanced PP&E investment Marketing Expenses
Research and Development Expense
Other Income from Operating Activities
d Expenses. Other Expenses from Operating Activities
OPERATING INCOME
9,159 vs. 633,206 for Nobel), showing it’s more efficient at
Investment Activity Income
market share, supporting their riskier growth approach. Investment Activity Expenses
wing they prioritize market presence and steady delivery. EBIT
r Gross Profit margins, showing better cost efficiency.
tegy, while Deva focuses on consistent product availability, Interest Income
Interest Expense
EARNINGS BEFORE TAX
Tax Expense/Income
Deferred Tax (Expenses)/Income
PROFIT (LOSS)
 EBIT=operating income + investment activity income + inve
Nobel İlaç Eczacıbaşı İlaç Deva Holding Capital Employed=Stockholder Equity+Non-Current Liabiliti
b)

46,681 672,782 277,046 Nobel İlaç

621,734 233,627 482,586 Profitability
125,071 88,567 430,763 ROA 11.28%
10,851 4,442 46,275 ROE 34.63%
46,048 1,927 4,601 Profit Margin % 15.12%
850,385 1,001,345 1,241,271 Value Creation
ROCE 30.24%
3,793 3,358,248 0 Gross Margin % --> Gross Profit/Sales Revenue
62.10%
87,686 373 0 EBIT % 25.30%
325,846 351,340 503,183 Capital/Asset Performance
66,627 102,914 299,159 Asset Turnover 0.75
23,902 1,667 34,135 PPET 3.13
8,480 13,101 13,959 INVT 3.09
0 9,349 27,795 Cashflow Performance
516,334 3,836,992 878,231 DOI 118.13
1,366,719 4,838,337 2,119,502 APT 5.31
DPO 68.80
277,267 80,050 232,198 ART 1.64
127,124 0 214,709 DSO 222.56
72,842 231,315 131,722 CCC 271.89
3,536 1,764 8,722
9,509 8,522 4,495
7,824 603 3,033
2,352 13,357 526
8,501 4,786 67,612
4,697 18,157 7,458
513,652 358,554 670,475

269,477 17,764 352,713

92,073 19,498 37,666 EBIT 258,004
25,569 4,118 27,806
20,661 161,145 0
407,780 202,525 418,185
921,432 561,079 1,088,660
445,287 4,277,258 1,030,842

1,019,641 877,076 1,373,983

-386,435 -561,262 -654,824
633,206 315,814 719,159
 -77,137 -63,766 -101,692
-332,665 -126,421 -178,857
-25,824 0 -39,388
97,194 188,078 52,018
-35,485 -88,799 -24,552
259,289 224,906 426,688
5,954 113,610 2,299
-7,239 -72,290 -131
258,004 266,226 428,856
16,501 4,346 0
-103,635 -77,455 -148,161
170,870 193,117 280,695
-16,656 -38,551 -1,946
0 8,162 7,267
154,214 162,728 286,016
nt activity income + investment activity expenses
ty+Non-Current Liabilities OR TOTAL ASSETS - CURRENT LIABILITIES

Eczacıbaşı İlaç Deva Holding

3.36% 13.49%
3.80% 27.75%
18.55% 20.82%

5.94% 29.60%
36.01% 52.34%
30.35% 31.21%

0.18 0.65
2.50 2.73
6.34 1.52

57.60 240.11
2.43 4.97
150.43 73.42
3.75 2.85
97.23 128.20
4.39 294.89
 4) Consider the following three firms in the global diamond retailing industry: Zales, Tiffany, and Blue Nile. Zales sells merc
high-end products are sold through stores; and Blue Nile’s supply chain structure is geared toward a purely centralized e-b
product variety and availability that Blue Nile provides, nor does it have the brand name advantage of Tiffany. Blue Nile op
Using these characterizations and the following financial information, calculate all relevant financial performance metrics t

Profitability FORMULAS Zales

ROA Net_Income / Total_Assets 0.84%
ROE Net_Income / Total_Equity(StakeHolder Equity) 5.40%
Profit Margin % Net_Income / Revenue * 100 0.53%
Value Creation
Gross Margin % (Gross Profit/Revenues)*100 52.14%
EBIT % (EBIT / Net Operating Revenues) * 100 1.86%
ROCE EBIT / (Capital Employed) 4.52%
Capital/Asset Performance
Asset Turnover Revenue / Total_Assets 1.59
PPET Revenue / PPE_Assets (Property, plant and equipm 17.34
INVT COGS / Inventory 1.18
Cashflow Performance
DOI (Inventories / COGS) * 365 310.04
APT COGS / Accounts_Payable 4.10
DPO (Accounts_Payable / COGS) * 365 89.09
ART Revenue / Accounts_Receivable(Net Receivables) 35.88
DSO (Accounts_Receivable / Revenue) * 365 10.17
CCC (Cash Conversion Cycle) -DPO + DOI + DSO 231.12

Tiffany
High Profitability: Highest Profit Margin %, ROA, Gross Margin %, and EBIT % (indicates strong brand value and a
command high prices).
Value Creation: Premium brand, high product variety, excellent customer service. High Gross Margin % shows eff
creation.
High Asset Base: Large total assets and high inventory/PPE (high-cost structure due to many high-value stores a
inventory).
(Look at Asset Turnover, PPET, INVT ratios – Tiffany has lower ratios here due to high assets/inventory).
Payment Terms: Long DSO (gives customers lenient payment terms), short DPO (pays suppliers quickly to keep r
positive).
(Check DSO and DPO for these effects).
Cash Flow Impact: High CCC (means Tiffany is funding its operations with own cash, impacting ROE).
(CCC shows the cost of keeping high-value inventory).
Blue Nile
Efficiency Focus: High ROE, ROCE, Asset Turnover, PPET, INVT (shows effective use of minimal assets to create re
Lean Supply Chain: Centralized e-business model, no physical stores. Low total assets and inventory assets.
(Check Total Assets and Inventory for these efficiency signs).
Low Gross Margin %: Indicates less focus on high-value creation through products, aligns with efficiency model.
(Look at Gross Margin % to see this lower value creation).
Negative CCC: Quick inventory turnover and lean operations mean Blue Nile finances operations through others
(CCC shows cash efficiency and reliance on supplier financing).
Zales
(CCC shows the cost of keeping high-value inventory).
Blue Nile
Efficiency Focus: High ROE, ROCE, Asset Turnover, PPET, INVT (shows effective use of minimal assets to create re
Lean Supply Chain: Centralized e-business model, no physical stores. Low total assets and inventory assets.
(Check Total Assets and Inventory for these efficiency signs).
Low Gross Margin %: Indicates less focus on high-value creation through products, aligns with efficiency model.
(Look at Gross Margin % to see this lower value creation).
Negative CCC: Quick inventory turnover and lean operations mean Blue Nile finances operations through others
(CCC shows cash efficiency and reliance on supplier financing).
Zales
Profitability Challenges: Low ROA, ROE, and Profit Margin % (suggests inefficiencies in generating returns from o
High Gross Margin %: Shows potential in value creation but not supported by efficient operations.
Operating Cost Issues: Relatively high operating costs, leading to low overall returns.
(Check EBIT % and ROCE to see high costs impacting returns).
High CCC: High inventory levels hurt cash flow, making operations costly without effective returns.
(CCC highlights inefficiency in inventory and cash flow management).

Tiffany commands the highest profit margin %, return on assets, gross margin % and EBIT%. These all attest to the
strength of the brand image, value created through top-tier product portfolio, product variety and customer service
Tiffany’s ability to extract the value created through higher prices. Value creation, however, comes at a cost and we
see that in terms of much larger assets, much larger PPE (facilities, etc.) and Inventory assets (as % of total assets), a
significantly lower Asset Turnover, PPET and INVT ratios, compared to the other firms. Being accessible to customer
through many stores and carrying high inventory of high-valued items are the obvious reasons. We further notice th
Tiffany gives the most lenient payment terms to its customers (highest DSO) while at the same time pays its supplie
the shortest term (lowest DPO). These are likely a strategic decision to keep both buyers and suppliers happy in doin
business with Tiffany. The result is that Tiffany has the worst CCC; meaning, in the path of creating customer value a
keeping suppliers happy, Tiffany bares the cost of financing its operations with own cash/assets (which also shows i
high equity levels and less-than-stellar ROE value).
Blue Nile operates the most efficient and effective business. While its profitability is not high (which is not even the
goal), they command the highest ROE, ROCE, Asset Turnover, PPET and INVT values, and the best CCC performance.
means, while keeping very low total assets and very low PPE and Inventory assets, Blue Nile is able to create relativ
the best value and
returns. A centralized supply chain with no stores and a careful selection of product inventories that balance tier, va
and availability surely pay off. Note it has the worst gross margin % which indicates low value creation through prod
and services, and goes hand-in-hand with the efficiency focus. A negative CCC value indicates that Blue Nile is able t
finance its operations through others’ cash, which is further supported by very low equity and very high ROE.
It is clear that Zales is struggling in their identity and supply chain decisions. Their value generation through
products/services is top-tier (very high gross margin %) but they are operating a very costly business (relatively spea
and they are unable to make any meaningful returns out of their assets (very low ROA) and equity (very low ROE), a
overall (very low profit margin %). While they are not as invested in PPE, Inventory and total assets as Tiffany is, the
also not able to put their assets to use effectively to create value. As a result, they have the worst ROCE value, the
strongest indication of lack of effectiveness. Too much inventory assets certainly impact their cashflow performance
negatively with a very long CCC. In Tiffany’s case, the very high CCC value was justified in terms of value creation, bu
not the case for Zales. At the end, we are looking at a company who did not invest in the right assets (particularly
inventories) to create value for its customers, and who is bleeding cash for its extremely costly operations.
nd Blue Nile. Zales sells merchandise primarily through stores but recently added an online channel; Tiffany also uses an online channel bu
ward a purely centralized e-business. Tiffany brand is very strong and well established; it is associated with glamour, trust, and customer se
ntage of Tiffany. Blue Nile operates primarily from one warehouse; Zales and Tiffany operate many stores, often in high-priced locations.
ancial performance metrics to highlight and demonstrate the differences in these firms’ supply chain structures and approach.

Capital Employed=Stockholder Equity+Non-Current Liabilities OR TOTAL ASSET

Tiffany Blue Nile INCOME STATEMENT

8.99% 5.75% Category Zales Tiffany
15.94% 59.48% Revenues 1888016.00 3794249.00
10.97% 2.10% Cost of sales 903602.00 1630965.00
GROSS MARGIN 984414.00 2163284.00
57.01% 18.76% Selling, general and administrative 916274.00 1466067.00
18.52% 3.24% Depreciation and amortization 33770.00 0.00
17.37% 76.51% Other operating income 748.00 0.00
OPERATING EARNINGS 35118.00 697217.00
0.82 2.74 Interest expense 23182.00 59069.00
4.63 50.79 Other income 0.00 5428.00
0.73 9.77 EARNINGS BEFORE INCOME TAXES 11936.00 643576.00
Income tax expense 1924.00 227419.00
500.03 37.37 NET EARNINGS 10012.00 416157.00
5.52 2.53 EBIT 35118.00 702645.00
66.11 144.49 ASSETS
21.81 114.79 Category Zales Tiffany
16.74 3.18 Cash and cash equivalents 17060.00 504838.00
450.65 -103.94 Accounts Receivable 52620.00 173998.00
Inventories 767540.00 2234334.00
Other current assets 0.00 238419.00
es strong brand value and ability to
TOTAL CURRENT ASSETS 837220.00 3151589.00
h Gross Margin % shows effective value Property and equipment, net 108875.00 818838.00
Deferred tax asset 107110.00 306385.00
o many high-value stores and large
Other assets 134050.00 354038.00
assets/inventory). TOTAL ASSETS 1187255.00 4630850.00
suppliers quickly to keep relationships
LIABILITIES
mpacting ROE). Category Zales Tiffany
Short-Term Loans 0.00 194034.00
Accounts payable and accrued liabilities 220558.00 295424.00
minimal assets to create returns).
and inventory assets. Deferred revenue 82110.00 66647.00
Deferred tax liability 107016.00 30487.00
gns with efficiency model.
operations through others’ cash.
minimal assets to create returns).
and inventory assets.
gns with efficiency model. TOTAL CURRENT LIABILITIES 409684.00 586592.00
operations through others’ cash. Long-term debt 410050.00 765238.00
Deferred revenue—long-term 109135.00 96724.00
Other liabilities 73057.00 570978.00
n generating returns from operations).
t operations. TOTAL LIABILITIES 1001926.00 2019532.00
Shareholder's Equity 185329.00 2611318.00

ctive returns.

BIT%. These all attest to the

variety and customer service, and
ever, comes at a cost and we can
assets (as % of total assets), and
Being accessible to customers
reasons. We further notice that
he same time pays its suppliers in
rs and suppliers happy in doing
of creating customer value and
sh/assets (which also shows in the

t high (which is not even their

d the best CCC performance. This
e Nile is able to create relatively
ventories that balance tier, variety
w value creation through products
dicates that Blue Nile is able to
uity and very high ROE.
e generation through
ostly business (relatively speaking)
and equity (very low ROE), and
total assets as Tiffany is, they are
e the worst ROCE value, the
t their cashflow performance
in terms of value creation, but it is
he right assets (particularly
y costly operations.
es an online channel but most of its diamond and other
, trust, and customer service. Zales does not have the
high-priced locations.
d approach.

ties OR TOTAL ASSETS - CURRENT LIABILITIES

Blue Nile
400035.00
324977.00
75058.00
62771.00
0.00
0.00
12287.00
0.00
679.00
12966.00
4574.00
8392.00
12966.00 ben ekledim hesaplamaya dikkat et EBIT=Operating expenses + other income

Blue Nile
87017.00
3485.00
33270.00
2155.00
125927.00
7876.00
7786.00
4312.00
145901.00

Blue Nile
60.00
128648.00
246.00
0.00
128954.00
625.00
2188.00
25.00
131792.00
14109.00
 5) Consider the following information on two firms in the retail sector in the UK. Calculate all fina
management (as indicated in the slides). Interpret the calculated financial metrics, as well as the
demonstrate and highlight the differences in these firms’ approach to supply chain management
differences, explaining why they are the key indicators.

Profitability Firm 1
ROA Net_Income / Total_Assets -1.73%
ROE Net_Income / Total_Equity(StakeHolder Equity) -3.79%
Profit Margin % Net_Income / Revenue * 100 -2.98%

Value Creation
Gross Margin % (Gross Profit/sales revenue)*100 34.90%
EBIT % (EBIT / Net Operating Revenues) * 100 0.38%
ROCE EBIT / (Capital Employed) 0.25%
Capital/Asset Performance
Asset Turnover Revenue / Total_Assets 0.58
PPET Revenue / PPE_Assets (Property, plant and equipm 2.97
INVT COGS / Inventory 24.64
Cashflow Performance
DOI (Inventory / COGS) * 365 14.81
APT COGS / Accounts_Payable 3.59
DPO (Accounts_Payable / COGS) * 365 101.69
ART Revenue / Accounts_Receivable(Net Receivables) 11.62
DSO (Accounts_Receivable / Revenue) * 365 31.40
CCC -DPO + DOI + DSO -55.48

On top of being able to interpret the face values of these financial ratios, we can make the following observations:
• Firm 1 shows a significant advantage in gross margin %, which indicates very high “value creation” performance. Howeve
value creation and sales revenue was not successfully converted into profitability (which also shows in EBIT% and ROCE). T
disproportionately high S&A expense, which indicate high costs of marketing, promotions, delivery, and sales service. In su
1, while achieving very high value creation, spends disproportionately high to create such value. It is an aggressive firm in t
itself, to grow and to make a significant impact. It shows great growth potential but also carries higher risk for investment.
shows a very significant non-operating profit, which leads to high profitability for the business despite having much lower
“operating” side. It should be questioned how sustainable this source of non-operating profit is.

• As fixed asset and inventory turnover values are comparable among the firms, we can attribute the low overall asset turn
of Firm 1 to relatively very high cash reserves. High cash reserves indicate focus on agility in terms of firm strategy and risk

• While both firms show impeccable overall cash flow performance (CCC), we observe that Firm 1 does significantly better
much later (higher DPO), despite lower cash collection performance (higher DSO).
• While both firms show impeccable overall cash flow performance (CCC), we observe that Firm 1 does significantly better
much later (higher DPO), despite lower cash collection performance (higher DSO).
 in the UK. Calculate all financial metrics relevant to supply chain
ncial metrics, as well as the values in the financial statements, to Capital Employed=Stockholder Equity+Non-Curre
supply chain management. State the key indicators of those
(millions pounds sterling)
INCOME STATEMENT
Sales Revenue
Cost of Goods Sold
Gross Profit
Firm 2 Other Income/loss
13.43% Sales & Administrative Expenses
49.87% Operating Profit
10.62% Non-Operating Profit/Loss
EBIT
Net interest
6.85% Tax
12.42% Net Profit
24.14% BALANCE SHEET
Cash and Cash Equivalents
1.26 Inventories
3.36 Accounts Receivable
26.06 Short-Term Lending
Other Current Assets
14.01 Total Current Assets
6.42 Intangible Assets
56.85 Property, Plant and Equipment
45.83 Financial Assets
7.96 Other Non-Current Assets
-34.88 Total Fixed Assets
Total Assets
he following observations: Accounts Payable
ue creation” performance. However, we observe that this high Short-Term Borrowings
also shows in EBIT% and ROCE). The culprit is the Short-Term Lease Liabilities
ns, delivery, and sales service. In sum, we can conclude that Firm
h value. It is an aggressive firm in the market, to differentiate Other Current Liabilities
carries higher risk for investment. Firm 2, on the other hand, Total Current Liabilities
siness despite having much lower gross profit % from
profit is. Long-Term Loan
Deferred Tax Liabilities
Long-Term Lease Liabilities
Other Non-Current Liabilities
attribute the low overall asset turnover performance on the part Total Non-Current Liabilities
y in terms of firm strategy and risk management.
Total Liabilities
Total Equity
hat Firm 1 does significantly better, thanks to paying suppliers
hat Firm 1 does significantly better, thanks to paying suppliers
holder Equity+Non-Current Liabilities OR TOTAL ASSETS - CURRENT LIABILITIES

Firm 1 Firm 2

2331.8 57887
1517.9 53922
813.9 3965
191.5 0
995.7 2229
9.7 1736
-0.9 5452
8.8 7188
52.8 937
25.6 104
-69.6 6147

1706.8 2510
61.6 2069
200.6 1263
402 3093
10.1 1872
2381.1 10807
629.2 11344
785 17211
166.8 5497
66.1 919
1647.1 34971
4028.2 45778
422.9 8399
14.7 1080
48.1 575
8.4 5943
494.1 15997
997.4 6188
19.3 48
359.7 7827
320.5 3393
1696.9 17456
2191 33453
1837.2 12325