Financial Management and Analysis Table of Contents Introduction 3 Presentation of the companies 3 Ratio analysis of the companies 5 Profitability ratios 5 Liquidity ratios 7 Efficiency ratios 9 Gearing ratios 11 Investment ratios 12 Ratio analysis strengths and weaknesses 14 Introduction Financial analysis involves the use of various financial statements, which perform several functions. Basics of financial analysis consist of a balance sheet and income statement. Income statement shows revenues and expenditures of enterprises over a certain period of time, usually for one year or semester. Balance sheet shows the assets, liabilities and owner's equity at a specific point in time (usually at the end of the year or semester) (http://www.accountingcoach.com/accounting-equation/explanation). Therefore we see that the balance sheet of the company's shows financial health at a specific point in time, and an income statement summarizes the profitability of the company over time. In this report, a comparison between the two companies will be done through ratio analysis. Biotech products, that accounted for less than 7 percent of revenue, generated by the ten top-selling treatments worldwide in 2001, created up to 71 percent of the top 10 last year. The number of biopharmaceutical medical products in clinical trials grew 155% in 11 years, from 355 in 2001 to 907 in 2012, with big pharmaceutical companies involved in about 40% of all biotech products in development in 2012. The Tufts CSDD (Center for the study and drug development) analysis, that examined R&D, pipeline (drugs that have entered into clinical trials and are pending FDA approval) and sales data for three specific time points - 2002, 2007 ... ... middle of paper ... ....35 Dividend yield ratio 0 0 0 0 0 Source: Based on data from Biogen Idec Inc. Annual Reports Earnings per share in (USD $) chart Price/earnings ratio (P/E) chart Ratio analysis strengths and weaknesses Strengths • Quantifiable and objective • Easy to do - uses available information • Easy to understood – widely accepted • Easy to compare competitors or with industry average Weaknesses • Too mechanical – can stop people considering the actual situation of company • Historical – includes historical data, not forward looking. • If comparing different companies, we should be careful because accounting policies may differ. • Not reflect market trends. • Problem of incompleteness rational numbers. • Ignores qualitative data such as: company strategies, quality of management, and cohesiveness of the board of directors.
Select any five (5) financial ratios that you have learned about in the text. Analyze the past three (3) years of the company’s financial data, which you may obtain from the company’s financial statements. Determine the company’s financial health.
Analysing the ratio of one with the other in the industry provides for better understanding about the performance of the company in market. An investor has to make a comparative analysis before making any investment decision.
I will be comparing five types of financial ratios through statement of comprehensive income and balance sheet, as follows:
Pfizer is one of the largest pharmaceutical companies in the world, its headquarter locates in the US. Pfizer financial report of its fourth-quarter claim a 3% decline in sales diverted to $13.12 billion from Q4 2013 and recording a 4% decline in adjusted profit per share to $0.54 [35]. The challenges that Pfizer face can be generalized to an industrial challenge and the global economic environment challenge [29]. For intellectual rights, Pfizer products, including BeneFIX, ReFacto, Xyntha and Enbrel will have to compete biosimilars (also referred to as follow-on biologics) in the future just when competitors obtain marketing approval for biosimilars or when patent expiated [29]. There are other challenges that put Pfizer
For a drug to get to market it must go through several stages of research and development (Abbott and Vernon). Starting with discovery research, preclinical testing on animals, three phases of clinical trials on humans, and finally FDA (Food and Drug Administration) approval (Abbott and Vernon). Out of several thousands of drugs only a few will make it to the FDA approval stage (Abbott and Vernon). Testing is a highly regulated, time consuming, and expensive process. From beginning to end the process can take fifteen years and less than one of five compounds will make it to market where it is still not guaranteed to succeed (Abbott and
The report will give an overview of each company, an explanation of what type of companies we are analyzing, the purpose of each company in terms of its goals and objectives, the products and services each company produces, and what future prospects we see these companies having. The reader should gain an understanding of each company as well. We also analyze the type of industry these companies are competing in. This will help us understand where each company fits in the marketplace. This is important because it places the two companies into a broader picture. The most important part of the financial report is the financial statement analysis. In this, the annual report of each company was analyzed. It studies the firms’ past earnings to understand their operating performances. It also forecasts future profitability and risk (short-term and long term). The financial statements give information on how these risks affect expected return. In the end, the reader will have an understanding of the two companies, the industry in which they operate, its financial standing in the past and present, and future profitability.
Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.
Financial Accounting is ‘Asset valuation, accounting record completeness and accuracy, accounting estimates, reporting transparency, fair value accounting issues, convergence of accounting standards, evolution of accounting standards, audit efficiency and effectiveness’, as suggested by Accounting Dictionary (2014).
Financial accounting is the analysis, classification, and recording of financial transactions and reporting such information to respective users especially external users who use the information to make decisions about their engagements with the entity. In financial accounting general purpose financial statements are used for external reporting. The public by standards imposes the development of the statements through respective national professional bodies, International Accounting Standards Board and respective company Acts for various nations.
Financial statements can be broadly analyzed through ratio analysis. A ratio of selected values on an enterprises financial statement is financial ratio. To evaluate the overall financial condition of a corporation or other organization there are standard ratios are used. The market price of the shares is used in regular financial ratios if division in a company traded in a financial market. The values are taken from the balance sheet, cash flow statement, income statement and retain earning statement for the purpose of analyzing the financial ratios.
What do you understand by the phrase “stakeholder analysis”? Attempt a stakeholder analysis of an organisation that you are closely associated with.
The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ Profitability - This information comes from the Profit and Loss account. Were we can compare this year's profit with the previous years.
Financial analysis is a process of studying the financial condition and main results of a company's financial activity in order to identify reserves to increase its market value and ensure further effective development. Also Financial analysis is used to understand the financial aspects of an investment and solutions.
Income statement-: Income statement is the financial statement that measures a company 's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities.
Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.