Running the Numbers to Chase Your Dream Job
Sonia Nazario, Enrique’s Journey
November 14, 2018House made of stars
November 14, 20189.8End-of-Chapter Case: Running the Numbers to Chase Your Dream Job
Context
Congratulations, you just landed an on-site interview for your dream job as a buyer at Intermountain Health Care. Intermountain Healthcare operates 23 hospitals and 198 clinics and has been recognized as one of America’s best-run health services providers. During your pre-interview planning, you learned the following two key points.
- Evidence-based decision-making. Intermountain Healthcare is known for emphasizing evidence-based decision-making. You translate this to mean that you will need to back up every answer during the interview with solid number crunching and sound critical thinking.
- Strategic Partnering. Intermountain Healthcare has a reputation for picking partners carefully and building collaborative capabilities with them. You’ve heard that during the day-long interview, you will be asked to develop and defend a supplier-evaluation scorecard.
Task
Immediately after lunch with the other five interview candidates, you are all given the same assignment. Jeromie Atkinson tells you all, “We’ve really enjoyed our initial interviews today. We will be doing some individual and group activities this afternoon. To get us started, we’d like you to identify a supplier of choice for oral care products that Intermountain’s health care professionals can distribute to its patients. We’ll give you 60 minutes to develop and compile the results for a supplier-evaluation scorecard. Each of you will then make a 15-minute presentation that communicates the following:
- Selection Criteria. Explain why you chose each of the criteria in your scorecard.
- Criteria Importance. Tell us how you decided to establish the importance of each criterion.
- Financial Health. Discuss the financial viability—strengths and weaknesses—of each potential supplier. Specifically identify the supplier in best position to be a long-term partner.
- Supplier Selection. Make the case for your supplier of choice.
The good news: You had built a spreadsheet template just in case you were ever asked to run the financials to assess a supplier’s financial health. You quickly determine that the three prime candidates are Unilever, P&G and Colgate and populate your spreadsheet (see the basic income statement and balance sheet data below). Now, it’s time to finish your calculations for P&G’s ratios, decide what the analysis means, and prepare your presentation. A faint smile crosses your lips as you say to yourself, “Let’s go to work.”
| Balance Sheet Data | P&G | Unilever | Colgate-Palmolive |
| Current Assets | $23,990 | $12,147 | $4,556 |
| Accounts Receivable | $6,508 | $4,436 | $1,668 |
| Beginning Total Assets | $132,244 | $47,512 | $12,724 |
| Ending Total Assets | $139,263 | $46,166 | $13,394 |
| PPE (Fixed Assets) | $21,666 | $9,445 | $3,852 |
| Beginning Inventory | $6,721 | $4,601 | $1,327 |
| Ending Inventory | $6,909 | $4,436 | $1,365 |
| Current Liabilities | $30,037 | $15,815 | $3,736 |
| Accounts Payable | $8,777 | $11,668 | $1,290 |
| Total Liabilities | $70,554 | $30,450 | $11,004 |
| Income Statement Data | |||
| Sales | $84,167 | $51,324 | $17,085 |
| Prior Year Sales | $83,680 | $46,467 | $16,734 |
| COGS | $42,428 | $30,703 | $7,153 |
| Prior Year COGS | $42,391 | $27,930 | $7,144 |
| SGA Expense | $26,950 | $12,033 | $5,930 |
| Prior Year SGA Expense | $26,421 | $12,013 | $5,758 |
| Interest Expense | $667 | $526 | $15 |
| Operating Income | $14,481 | $6,989 | $3,889 |
| Net Income | $11,312 | $4,948 | $2,472 |
| Equity Data | |||
| Beginning Stockholder’s Equity | $64,035 | $14,293 | $2,541 |
| Ending Stockholder’s Equity | $68,709 | $15,159 | $2,390 |
| Profitability Ratios | P&G | Unilever | Colgate-Palmolive |
| Gross Profit Margin | 40.2% | 58.1% | |
| Operating Profit Margin | 13.6% | 22.8% | |
| Profit Margin | 9.6% | 14.5% | |
| Return on Assets | 10.6% | 18.9% | |
| Return on Equity | 33.6% | 100.3% | |
| Liquidity Ratios | P&G | Unilever | Colgate-Palmolive |
| Current Ratio | 0.77 | 1.22 | |
| Quick Ratio | 0.49 | 0.85 | |
| Leverage Ratios | P&G | Unilever | Colgate-Palmolive |
| Debt to Equity | 2.01 | 4.60 | |
| Times Interest Earned | 10.41 | 165.80 | |
| Activity Ratios | P&G | Unilever | Colgate-Palmolive |
| Inventory Turnover | 6.92 | 5.24 | |
| Avg. Days in Inventory | 52.74 | 69.65 | |
| Fixed Asset Turnover | 5.43 | 4.44 | |
| Days Receivable | 31.55 | 35.63 | |
| Days Payable | 139.46 | 65.48 | |
| Composite Ratio | P&G | Unilever | Colgate-Palmolive |
| Cash to Cash Cycle | -55.18 | 39.81 |
Questions
- Based solely on your financial analysis, which supplier do you recommend? How does your recommendation change when you include the other criteria on your list?
- What does your scorecard look like? Be prepared to explain your logic.
- What did you learn about each supplier from your assessment of financial health? What inferences can you draw regarding each company’s long-term supplier development strategy?