On the following pages, I have attached selected financial ratios for Abbott Laboratories and Pfizer, Inc., respectively. Required Using the relevant ratios from the attached schedules, please answer the following questions. To do this you should consider the 3-year trend, i.e. improving, declining, or remaining stable, and the absolute metrics presented. In answering each question, please identify the relevant ratio(s) from the attached schedules supporting your answer. Over the 3-year period presented, which company is most effective at collecting cash on its accounts receivable? Using the ratios provided, please explain/support your answer. Over the 3-year period presented, which company generated the highest return on its owners’ investment? Using the ratios provided, please explain/support your answer. Based on the 3-year performance, which company has the riskiest debt profile? Using the ratios provided, please explain/support your answer. Based on the 3-year performance, which company is in the best position to meet its current obligations and have assets available to meet unexpected opportunities and expenses? Using the ratios provided, please explain/support your answer. If you were a bank lending officer and each of these companies applied for a $1 billion office complex construction loan (i.e. to be repaid in 25 years with interest payments beginning immediately after funding begins), which company would you be more likely to lend? Using the ratios provided, please explain/support your answer. If you were a financial analyst for a global investment company or pension fund, which company would you assign the higher investment recommendation? Using the ratios provided, please explain/support your answer. Abbott Laboratories (NYS: ABT) Profitability Ratios 12/31/2019 12/31/2018 12/31/2017 ROA % (Net) 5.46 3.3 0.74 ROE % (Net) 11.97 7.71 1.85 EBITDA Margin % 24.03 22.47 22.02 Liquidity Ratios 12/31/2019 12/31/2018 12/31/2017 Quick Ratio 0.88 1.03 1.67 Current Ratio 1.44 1.62 2.26 Debt Management 12/31/2019 12/31/2018 12/31/2017 LT Debt to Equity 0.54 0.63 0.88 Total Debt to Equity 0.58 0.64 0.9 Interest Coverage 7.87 5.06 2.21 Asset Management 12/31/2019 12/31/2018 12/31/2017 Total Asset Turnover 0.47 0.43 0.42 Receivables Turnover 6.02 5.86 6.45 Inventory Turnover 3.26 3.44 4.09 Accounts Payable Turnover 10.25 11.37 15.3 Property Plant & Equip Turnover 4.09 4.03 4.12 Per Share 12/31/2019 12/31/2018 12/31/2017 Book Value per Share 17.64 17.39 17.72 Pfizer Inc. (NYS: PFE) Profitability Ratios 12/31/2019 12/31/2018 12/31/2017 ROA % (Net) 9.96 6.73 12.41 ROE % (Net) 25.72 16.56 32.57 EBITDA Margin % 45.68 33.11 34.15 Liquidity Ratios 12/31/2019 12/31/2018 12/31/2017 Quick Ratio 0.5 0.84 0.93 Current Ratio 0.88 1.57 1.35 Debt Management 12/31/2019 12/31/2018 12/31/2017 LT Debt to Equity 0.57 0.52 0.47 Total Debt to Equity 0.83 0.66 0.61 Interest Coverage 7.67 11.78 14.61 Asset Management 12/31/2019 12/31/2018 12/31/2017 Total Asset Turnover 0.32 0.32 0.31 Receivables Turnover 6.18 6.6 6.39 Inventory Turnover 1.29 1.49 1.57 Accounts Payable Turnover 11.64 11.5 11.43 Property Plant & Equip Turnover 3.78 3.94 3.87 Per Share 12/31/2019 12/31/2018 12/31/2017 Book Value per Share 11.41 11.09 11.93

On the following pages, I have attached selected financial ratios for Abbott Laboratories and Pfizer, Inc., respectively. Required Using the relevant ratios from the attached schedules, please answer the following questions. To do this you should consider the 3-year trend, i.e. improving, declining, or remaining stable, and the absolute metrics presented. In answering each question, please identify the relevant ratio(s) from the attached schedules supporting your answer. Over the 3-year period presented, which company is most effective at collecting cash on its accounts receivable? Using the ratios provided, please explain/support your answer. Over the 3-year period presented, which company generated the highest return on its owners’ investment? Using the ratios provided, please explain/support your answer. Based on the 3-year performance, which company has the riskiest debt profile? Using the ratios provided, please explain/support your answer. Based on the 3-year performance, which company is in the best position to meet its current obligations and have assets available to meet unexpected opportunities and expenses? Using the ratios provided, please explain/support your answer. If you were a bank lending officer and each of these companies applied for a $1 billion office complex construction loan (i.e. to be repaid in 25 years with interest payments beginning immediately after funding begins), which company would you be more likely to lend? Using the ratios provided, please explain/support your answer. If you were a financial analyst for a global investment company or pension fund, which company would you assign the higher investment recommendation? Using the ratios provided, please explain/support your answer. Abbott Laboratories (NYS: ABT) Profitability Ratios 12/31/2019 12/31/2018 12/31/2017 ROA % (Net) 5.46 3.3 0.74 ROE % (Net) 11.97 7.71 1.85 EBITDA Margin % 24.03 22.47 22.02 Liquidity Ratios 12/31/2019 12/31/2018 12/31/2017 Quick Ratio 0.88 1.03 1.67 Current Ratio 1.44 1.62 2.26 Debt Management 12/31/2019 12/31/2018 12/31/2017 LT Debt to Equity 0.54 0.63 0.88 Total Debt to Equity 0.58 0.64 0.9 Interest Coverage 7.87 5.06 2.21 Asset Management 12/31/2019 12/31/2018 12/31/2017 Total Asset Turnover 0.47 0.43 0.42 Receivables Turnover 6.02 5.86 6.45 Inventory Turnover 3.26 3.44 4.09 Accounts Payable Turnover 10.25 11.37 15.3 Property Plant & Equip Turnover 4.09 4.03 4.12 Per Share 12/31/2019 12/31/2018 12/31/2017 Book Value per Share 17.64 17.39 17.72 Pfizer Inc. (NYS: PFE) Profitability Ratios 12/31/2019 12/31/2018 12/31/2017 ROA % (Net) 9.96 6.73 12.41 ROE % (Net) 25.72 16.56 32.57 EBITDA Margin % 45.68 33.11 34.15 Liquidity Ratios 12/31/2019 12/31/2018 12/31/2017 Quick Ratio 0.5 0.84 0.93 Current Ratio 0.88 1.57 1.35 Debt Management 12/31/2019 12/31/2018 12/31/2017 LT Debt to Equity 0.57 0.52 0.47 Total Debt to Equity 0.83 0.66 0.61 Interest Coverage 7.67 11.78 14.61 Asset Management 12/31/2019 12/31/2018 12/31/2017 Total Asset Turnover 0.32 0.32 0.31 Receivables Turnover 6.18 6.6 6.39 Inventory Turnover 1.29 1.49 1.57 Accounts Payable Turnover 11.64 11.5 11.43 Property Plant & Equip Turnover 3.78 3.94 3.87 Per Share 12/31/2019 12/31/2018 12/31/2017 Book Value per Share 11.41 11.09 11.93

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter5: Sales And Receivables

Section: Chapter Questions

Problem 87APSA

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Problem 3

On the following pages, I have attached selected financial ratios for Abbott Laboratories and Pfizer, Inc., respectively.

Required

Using the relevant ratios from the attached schedules, please answer the following questions. To do this you should consider the 3-year trend, i.e. improving, declining, or remaining stable, and the absolute metrics presented.

In answering each question, please identify the relevant ratio(s) from the attached schedules supporting your answer.

Over the 3-year period presented, which company is most effective at collecting cash on its accounts receivable? Using the ratios provided, please explain/support your answer.

Over the 3-year period presented, which company generated the highest return on its owners’ investment? Using the ratios provided, please explain/support your answer.

Based on the 3-year performance, which company has the riskiest debt profile? Using the ratios provided, please explain/support your answer.

Based on the 3-year performance, which company is in the best position to meet its current obligations and have assets available to meet unexpected opportunities and expenses? Using the ratios provided, please explain/support your answer.

If you were a bank lending officer and each of these companies applied for a $1 billion office complex construction loan (i.e. to be repaid in 25 years with interest payments beginning immediately after funding begins), which company would you be more likely to lend? Using the ratios provided, please explain/support your answer.

If you were a financial analyst for a global investment company or pension fund, which company would you assign the higher investment recommendation? Using the ratios provided, please explain/support your answer.

	Abbott Laboratories (NYS: ABT)

Profitability Ratios	12/31/2019	12/31/2018	12/31/2017
ROA % (Net)	5.46	3.3	0.74
ROE % (Net)	11.97	7.71	1.85
EBITDA Margin %	24.03	22.47	22.02

Liquidity Ratios	12/31/2019	12/31/2018	12/31/2017
Quick Ratio	0.88	1.03	1.67
Current Ratio	1.44	1.62	2.26

Debt Management	12/31/2019	12/31/2018	12/31/2017
LT Debt to Equity	0.54	0.63	0.88
Total Debt to Equity	0.58	0.64	0.9
Interest Coverage	7.87	5.06	2.21

Asset Management	12/31/2019	12/31/2018	12/31/2017
Total Asset Turnover	0.47	0.43	0.42
Receivables Turnover	6.02	5.86	6.45
Inventory Turnover	3.26	3.44	4.09
Accounts Payable Turnover	10.25	11.37	15.3
Property Plant & Equip Turnover	4.09	4.03	4.12

Per Share	12/31/2019	12/31/2018	12/31/2017
Book Value per Share	17.64	17.39	17.72

Pfizer Inc. (NYS: PFE)

Profitability Ratios	12/31/2019	12/31/2018	12/31/2017
ROA % (Net)	9.96	6.73	12.41
ROE % (Net)	25.72	16.56	32.57
EBITDA Margin %	45.68	33.11	34.15

Liquidity Ratios	12/31/2019	12/31/2018	12/31/2017
Quick Ratio	0.5	0.84	0.93
Current Ratio	0.88	1.57	1.35

Debt Management	12/31/2019	12/31/2018	12/31/2017
LT Debt to Equity	0.57	0.52	0.47
Total Debt to Equity	0.83	0.66	0.61
Interest Coverage	7.67	11.78	14.61

Asset Management	12/31/2019	12/31/2018	12/31/2017
Total Asset Turnover	0.32	0.32	0.31
Receivables Turnover	6.18	6.6	6.39
Inventory Turnover	1.29	1.49	1.57
Accounts Payable Turnover	11.64	11.5	11.43
Property Plant & Equip Turnover	3.78	3.94	3.87

Per Share	12/31/2019	12/31/2018	12/31/2017
Book Value per Share	11.41	11.09	11.93

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