Pfizer - Financial Analysis

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Name: Khiem Nguyen FINANCIAL ANALYSIS REPORT (Draft 1) For PFIZER INC. Introduction and Shareholder Analysis Pfizer (NYSE: PFE) is involved in the development, manufacturing and marketing of pharmaceutical products. The industry is intensely competitive. There are a few unique characteristics. Pharmaceutical products have long and expensive development periods – upwards of ten years and $100 million depending on the nature of the drug and the scope of the clinical trials process. In order to encourage companies to engage in innovation, companies are given lengthy patent protection for their drugs upon receiving regulatory approval. This allows them to charge monopoly rents so that they may recover the development cost. A…show more content…
Furthermore, Pfizer’s inventory turnover indicates the degree to which the firm’s inventory is converted to cash. Unsold inventory represents business risk and inefficiency. The days’ sales in inventory has increased from 169.8 to 194.4. Average inventory turn has declined from 2.0 to 1.68 and ending inventory turn has declined from 2.12 to 1.85. This indicates that Pfizer’s inventory supplies are building – they are not selling their inventory as quickly as they have in the past. Put together, Pfizer has seen deterioration in its liquidity over the past year. The company’s current and quick ratios have declined, although they are still healthy. The company has tightened receivables, but this is an attempt to improve cash flow in light of rapidly building inventories. Pfizer’s inventory levels, it should be noted, are only high compared with 2007 numbers; they are far below inventory levels of four or five years ago. Debt Management From 2007 to 2008, Pfizer’s debt ratio has increased from 42% to 48%. Even though this ratio is still well below one, it still further supports the idea that Pfizer has seen a constriction of its cash flow, and it has been forced to borrow to maintain a necessary level of working capital. In addition, the debt-equity ratio has also increased from 0.77 in 2007 to 0.93 in 2008 which suggests that Pfizer has been aggressive in financing its growth with debt in the past year. On the other hand, the long-term-debt to equity
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