Lilly 's Long Term Debt Ratio

Review of ABC Company and the directions it is targeting. The strategy of the company is to lift the expected sales in an aggressive fashion, with the expected end target being to triple the current levels. The plan is to push sales into the targeted range of $3 million within 3 years versus the current amount which sits at $1.2 million. We will identify the perceived risk factors that may impact this aggressive strategy and its successful execution. The following will be those risk factors:

Such an intense focus has been placed on quarterly earnings as an indication of a company’s success by everyone from analysts to executives that ethics have for the most part been thrown out the window, sacrificed to the all important number, i.e. earnings per share. This is the theory in Alex Berenson’s book “The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America.” This number has become part of a game to be played, a figure to be manipulated – beat the number and Wall Street all but throws a parade, miss it and a company’s stock may be abandoned. Take into account the incentives that executives have to beat the number and one can find plenty of reasons to manage earnings.

This signals that although company is profitable but the retained earnings are not enough to fuel the exponential growth of the company. Payable period increased from 35 days in 1989 to 45 days in 1990(Exhibit 2), which shows that the company is lagging behind the standard due date of 30 days. This sole dependency on accounts payable for the uses of cash will make the situation worse. Therefore for additional inventory and accounts receivable to sustain the growth company needs external financing from the bank.

Pfizer is the largest American pharmaceutical company and one of the largest pharmaceutical companies in the world. It competes with Merck and Glaxo, and markets such well-known medications as Celebrex and Viagra. However, the pharmaceutical industry as a whole has undergone changes in recent years with significant consolidation taking place and with increased scrutiny regarding the ways in which drugs are developed, tested and marketed. In addition, recent controversies have erupted regarding Merck's drug Vioxx, and Pfizer has been the target of unwanted publicity regarding its painkiller Celebrex. This research considers the strategic position of Pfizer, including its strengths and weaknesses as well

Opportunities for Pfizer exist in two areas, first being the restructuring into a more lean and competitive organization and second is the penetration into emerging markets such as China and India who are now more able to purchase their products. With sales of approximately $50 billion per year, Pfizer has the opportunity to streamline its operations, cut costs, and add flexibility to the organization. If successful in this, they can better realize their profits and invest that money into future competitive products for the market.

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.

Afterwards, the firm’s revenue began to increase steadily, peaking in the fourth quarter in 1988 at $25,131,000.00. However, when going from the last quarter in 1988 to the first quarter in 2000 we can see a 23% decrease in revenue ending at $19,348.00 which is more than likely a sign that the peak could have been due to a high point in the year from holiday shopping, for example. The company’s Account Receivables, like it’s gross margins, are at it’s lowest in the first quarter of each year. In 1997 in the first quarter the company’s Account Receivables were at $30,857,000.00 which indicates a significant decrease in sales. It was not surprising to see that the point of the company’s highest Account Receivables was in the fourth quarter of 1999 at $37,324,000.00. Due to the fact that the Accounts Receivables were rising and declining linearly in comparison to sales, we can assume that clients were paying off invoices appropriately and that the difference was mainly influenced by the increase or decrease in company sales. IBM’s gross margins were at it’s lowest in the first fiscal quarter of1988 at $6,450,000.00 before increasing to 34% to $9,809,000.00 by the fourth quarter of the same year. The constant slight shifting of gross margins per quarter indicates stability and a positive outlook for the company.

Pro forma earnings are earnings which often exclude non-recurring items and are defined by each individual firm rather than under the general accepted accounting principle (GAAP). Pro forma earnings reporting is commonplace in the U.S. (Doyle et al. 2013; Bentley et al. 2016). Items such as nonrecurring gains and losses, depreciation and amortization expenses, write-downs, restructuring and merger costs, stock compensation expenses, and interest expenses are often excluded in pro forma earnings figures. Since many of these exclusions are likely to be transitory in nature, pro forma earnings can be viewed as a better measure of permanent earnings and have received increasing focus recently. Research studies found that pro forma earnings are more value relevant, informative, and better associated with stock prices than GAAP earnings (Bradshaw and Sloan, 2002; Bhattacharya et al.,2003; Brown and Sivakumar, 2003; Entwistle et al., 2010). However, exclusion of the non-recurring items is completely discretionary (Doyle et al., 2013) and managers may use the flexibility to opportunistically influence the market’s perception of the firm’s recurring earnings (Dechow and Schrand, 2004). Managers may have strong incentives to manipulate the reported pro forma earnings to influence investors’ perceptions about the

In the 90’s the company continued to invent more medications for many different aliments and illnesses which made them a force in the industry. Not all their medication has been a success however, the company has had several lawsuits filed against them and has been in trouble with the FDA. In 2015, a lawsuit was settled against the company and their Japanese partner for 2.37 billion dollars, the largest settlement in US history. [14] Though Eli Lilly has had some setbacks with lawsuits and losing patents on some of their highly successful medications, the company continues to invest in research and development for new drug and have a positive outlook on their

Eli Lilly prepares their financial statements in accordance with the requirements of The Securities and Exchange Commission Form 10-Q. It it’s worth noting that the corporation in the For 10-Q does not include information and/or footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with Generally accepted accounting principles (GAAP). The company makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Johnson and Johnson in the other hand, one of the company’s top competitors include adjustments consisting of normal recurring adjustments

Johnson & Johnson’s after-tax cost of debt is 2.20% and its cost of equity is 5.90%. It raises money primarily through equity as its weight of equity and weight debt is about 92% and 8%, respectively. It’s after-tax WACC is 5.61%. Pfizer’s after-tax cost of debt and cost of equity is 0.85% and 7.70%, respectively. Only 12.18% of debt accounts for its total debt and equity, while equity makes up the remaining 87.82%. Pfizer’s after-tax WACC is 6.87%. AstraZeneca’s after-tax cost of debt and equity is 1.01% and 5.90%. It’s weight of debt is 28.37% and its weight of equity is 71.63%. AstraZeneca’s after-tax WACC is 4.51%.

What has been the financial performance of AstraZeneca over the last three years, and how does this compare to a company in the same industry?

The firm’s accounts receivable ratio increased from 68.71 in 2006 to 74.56 in 2010. This means that it is taking Abbott almost six days longer to collect from its customers today than it did five years ago. Furthermore, the firm’s accounts payable days has decreased from 43.72 in 2006 to 38.22 in 2010. This means that Abbott is paying its suppliers 5½ days earlier today than it did in 2006. A change in the inventory ratio from 8.01 in 2006 to 11.03 in 2010 indicates that it is taking the firm longer to sell finished goods than it used to. The increase in the accounts receivable and inventory ratios, combined with a decrease in the accounts payable ratio, indicates poor working capital management and helps to explain why the firm has increased its holdings of cash and short-term investments. To correct this, Abbott’s managers should focus on collecting cash from its customers faster and delaying payments to its suppliers. To maximize its cash position, the firm would be best served by paying its suppliers in the same amount of time as it collects payment from its customers.

In my point of view, Pfizer and its two competitors - Merck and Johnson & Johnson all have low cost of capital. Although they all involved in a lot borrowings , they all have very good capital structures as pharmaceutical companies. The reason is that the costs in R&D and innovation are extremely high in the pharmaceutical industry.

* With a focus on net income, managers could be incentivized to maximize ROE at the expense of other stakeholders, particularly bondholders. For instance, managers may fuel earnings growth by over-levering the company to benefit from tax shields in order to increase the value spread.  In addition, there are many other ways in which managers can manipulate earnings, for example, by slowing down depreciation charges or selling off assets to realize extraordinary gains.