Comparison of Medtronic's Financial Statements to Baxter's Financial Statements

7667 Words Feb 10th, 2007 31 Pages
Medtronic 's Ratings
Earning Power

I would rank Medtronic 's earning power at a 9 on a scale of 1 (very weak) to 10 (very strong). Medtronic has successfully demonstrated their ability to grow and provide substantial return to their owners.
Medtronic 's net earnings have steadily increased from $984.0 million in 2002, to $1599.8 million in 2003, to $1959.3 million in 2004. Their total assets have increased 13.7% from $12,405.5 million in 2003 to $14,110.8 million in 2004. These measures show that Medtronic has been successful in generating profits and increasing their net assets. These measures have steadily been increasing and therefore this type of progress can reasonably be expected to persist in the future.
Total liabilities
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This account only made up 8% of the current liabilities for this year. These two facts show that the accounts payable does not seem to be a significant form of financing. The company is not relying heavily upon accounts receivable and is probably not having a difficult time generating cash to pay to suppliers. One last measure used to determine the ranking provided for Medtronic 's solvency was the debt/equity ratio. Using this ratio, we see that the average total liabilities only make up 56% of the total Stockholder 's equity. This shows that the company 's debt is bout half of the company 's total book value. All of these measures are consistent with the idea that Medtronic is able to produce cash to meet debts as they come due. If the current and quick ratio proved that the company was carrying a large percentage of current assets as compared to current liabilities, and if the debt didn 't make up a majority of the stockholder 's equity, the ranking would have been higher.

Earning Quality and Persistence

When ranking Medtronic 's earning quality and persistence I would give the company a ranking of 8 on a scale of 1 to 10.
Net operating income is considered to be made up of usual and frequent activities and is therefore considered to be persistent. This has steadily increased over the past three years and can reasonably be expected to continue in the future. In 2002, the amount was $1590.2 million,
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