I have attached their Consolidated Balance Sheets which reports assets, liabilities and shareholders’ equity as of December 31, 2019 and 2018. Required: Using the Abbott Lab’s balance sheet, answer the following:Which balance sheet line items would you use to evaluate the company’s liquidity, i.e., ability to meet short-term obligations and remain capable of dealing with unexpected opportunities or challenges.For both periods presented, compute “net working capital” for the periods presented. Net working capital = Current assets – Current liabilitiesBased on your computation, has Abbott’s net working capital improved or declined?Which balance sheet line items would you use to evaluate the company’s solvency, i.e. ability to meet long-term obligations, execute the company’s long-term strategic initiatives, and remain in business.For both periods presented, compute Abbott Lab’s “Debt-to-equity” ratio. Debt-to-equity = Total liabilities ÷ Total shareholders’ equity.Based on your computations, has Abbott’s Debt-to-equity improved or declined? Abbott Laboratories and SubsidiariesConsolidated Statement of Earnings(in millions except per share data)Year Ended December 31201920182017Net Sales$ 31,904$ 30,578$ 27,390Cost of products sold, excluding amortization of intangible assetsAmortization of intangible assetsResearch and developmentSelling, general and administrativeTotal Operating Cost and ExpensesOperating EarningsInterest expense13,2311,9362,4409,76512,7062,1782,3009,74412,4091,9752,2609,18227,3724,53267026,92825,8263,6501,564826904(105)28(124)(34)Interest income(94)Net foreign exchange (gain) lossDebt extinguishment costsOther (income) expense, netEarnings from Continuing Operations Before TaxesTaxes on Earnings from Continuing Operations763167(191)4,077(139)2,873(1,413)2,2313905391,878Earnings from Continuing Operations3,6872,334353Net Earnings from Discontinued Operations, net of taxes34124Net Earnings$ 3,687$ 2,368$477Basic Earnings Per Common Share --Continuing OperationsDiscontinued OperationsNet Earnings$2.07$1.32$0.200.020.072$2.072$1.34$0.27Diluted Earnings Per Common Share --Continuing OperationsDiscontinued OperationsNet Earnings$2.06$1.31$0.200.020.072$2.06$1.33$0.27Average Number of Common Shares Outstanding Used forBasic Earnings Per Common ShareDilutive Common Stock OptionsAverage Number of Common Shares Outstanding Plus DilutiveCommon Stock Options1,7681,7581,74013129.1,7811,7701,749Outstanding Common Stock Options Having No Dilutive Effect61The accompanying notes to consolidated financial statements are an integral part of this statement. Abbott Laboratories and SubsidiariesConsolidated Balance Sheet(dollars in millions)December 3120192018AssetsCurrent assets:Cash and cash equivalentsInvestments, primarily bank time deposits and U.S. treasury billsTrade receivables, less allowances of-2019: $384; 2018: $314$3,8602$3,8442802425,4255,182Inventories:Finished productsWork in process2,7842,407560499Materials972890Total inventories4,3163,796Other prepaid expenses and receivablesTotal current assets1,7861,56815,66714,632Investments883897Property and equipment, at cost:Land519501BuildingsEquipmentConstruction in progress3,55510,7563,70211,4681,11089415,7068,14316,799Less: accumulated depreciation and amortizationNet property and equipmentIntangible assets, net of amortizationGoodwill8,7618,0387,56317,02523,1953,07918,94223,2541,885Deferred income taxes and other assets$ 67,887$ 67,173Liabilities and Shareholders' InvestmentCurrent liabilities:Short-term borrowingsTrade accounts payableSalaries, wages and commissionsOther accrued liabilities2$2012003,2521,2374,0352,9751,1823,780Dividends payableIncome taxes payableCurrent portion of long-term debt6355632263051,2777Total current liabilities10,8639,012Long-term debtPost-employment obligations and other long-term liabilitiesCommitments and contingenciesShareholders' investment:16,6619,06219,3598,080Preferred shares, one dollar par value Authorized – 1,000,000 shares, none issuedCommon shares, without par value Authorized – 2,400,000,000 sharesIssued at stated capital amount – Shares: 2019: 1,976,855,085; 2018: 1,971,189,465Common shares held in treasury, at cost -Shares: 2019: 214,351,838; 2018: 215,570,043Earnings employed in the businessAccumulated other comprehensive income (loss)23,85323,512(10,147)25,847(9,962)24,560(7,586)(8,465)Total Abbott Shareholders' Investment31,08830,524Noncontrolling interests in subsidiaries213198Total Shareholders' Investment31,30130,7222$67,887$ 67,173The accompanying notes to consolidated financial statements are an integral part of this statement.

Liquidity ratios: These ratios are used to evaluate the ability of an organization to pay off its…

Answered: Required: Using the Abbott Lab’s…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter3: The Basics Of Record Keeping And Financial Statement Preparation: Income Statement

Section: Chapter Questions

Problem 10E

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I have attached their Consolidated Balance Sheets which reports assets, liabilities and shareholders’ equity as of December 31, 2019 and 2018.

Required: Using the Abbott Lab’s balance sheet, answer the following:

Which balance sheet line items would you use to evaluate the company’s liquidity, i.e., ability to meet short-term obligations and remain capable of dealing with unexpected opportunities or challenges.
1. For both periods presented, compute “net working capital” for the periods presented. Net working capital = Current assets – Current liabilities
2. Based on your computation, has Abbott’s net working capital improved or declined?
Which balance sheet line items would you use to evaluate the company’s solvency, i.e. ability to meet long-term obligations, execute the company’s long-term strategic initiatives, and remain in business.
1. For both periods presented, compute Abbott Lab’s “Debt-to-equity” ratio. Debt-to-equity = Total liabilities ÷ Total shareholders’ equity.
2. Based on your computations, has Abbott’s Debt-to-equity improved or declined?

Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
(in millions except per share data)
Year Ended December 31
2019
2018
2017
Net Sales
$ 31,904
$ 30,578
$ 27,390
Cost of products sold, excluding amortization of intangible assets
Amortization of intangible assets
Research and development
Selling, general and administrative
Total Operating Cost and Expenses
Operating Earnings
Interest expense
13,231
1,936
2,440
9,765
12,706
2,178
2,300
9,744
12,409
1,975
2,260
9,182
27,372
4,532
670
26,928
25,826
3,650
1,564
826
904
(105)
28
(124)
(34)
Interest income
(94)
Net foreign exchange (gain) loss
Debt extinguishment costs
Other (income) expense, net
Earnings from Continuing Operations Before Taxes
Taxes on Earnings from Continuing Operations
7
63
167
(191)
4,077
(139)
2,873
(1,413)
2,231
390
539
1,878
Earnings from Continuing Operations
3,687
2,334
353
Net Earnings from Discontinued Operations, net of taxes
34
124
Net Earnings
$ 3,687
$ 2,368
$
477
Basic Earnings Per Common Share --
Continuing Operations
Discontinued Operations
Net Earnings
$
2.07
$
1.32
$
0.20
0.02
0.07
2$
2.07
2$
1.34
$
0.27
Diluted Earnings Per Common Share --
Continuing Operations
Discontinued Operations
Net Earnings
$
2.06
$
1.31
$
0.20
0.02
0.07
2$
2.06
$
1.33
$
0.27
Average Number of Common Shares Outstanding Used for
Basic Earnings Per Common Share
Dilutive Common Stock Options
Average Number of Common Shares Outstanding Plus Dilutive
Common Stock Options
1,768
1,758
1,740
13
12
9.
1,781
1,770
1,749
Outstanding Common Stock Options Having No Dilutive Effect
61
The accompanying notes to consolidated financial statements are an integral part of this statement.

Abbott Laboratories and Subsidiaries
Consolidated Balance Sheet
(dollars in millions)
December 31
2019
2018
Assets
Current assets:
Cash and cash equivalents
Investments, primarily bank time deposits and U.S. treasury bills
Trade receivables, less allowances of-2019: $384; 2018: $314
$
3,860
2$
3,844
280
242
5,425
5,182
Inventories:
Finished products
Work in process
2,784
2,407
560
499
Materials
972
890
Total inventories
4,316
3,796
Other prepaid expenses and receivables
Total current assets
1,786
1,568
15,667
14,632
Investments
883
897
Property and equipment, at cost:
Land
519
501
Buildings
Equipment
Construction in progress
3,555
10,756
3,702
11,468
1,110
894
15,706
8,143
16,799
Less: accumulated depreciation and amortization
Net property and equipment
Intangible assets, net of amortization
Goodwill
8,761
8,038
7,563
17,025
23,195
3,079
18,942
23,254
1,885
Deferred income taxes and other assets
$ 67,887
$ 67,173
Liabilities and Shareholders' Investment
Current liabilities:
Short-term borrowings
Trade accounts payable
Salaries, wages and commissions
Other accrued liabilities
2$
201
200
3,252
1,237
4,035
2,975
1,182
3,780
Dividends payable
Income taxes payable
Current portion of long-term debt
635
563
226
305
1,277
7
Total current liabilities
10,863
9,012
Long-term debt
Post-employment obligations and other long-term liabilities
Commitments and contingencies
Shareholders' investment:
16,661
9,062
19,359
8,080
Preferred shares, one dollar par value Authorized – 1,000,000 shares, none issued
Common shares, without par value Authorized – 2,400,000,000 shares
Issued at stated capital amount – Shares: 2019: 1,976,855,085; 2018: 1,971,189,465
Common shares held in treasury, at cost -Shares: 2019: 214,351,838; 2018: 215,570,043
Earnings employed in the business
Accumulated other comprehensive income (loss)
23,853
23,512
(10,147)
25,847
(9,962)
24,560
(7,586)
(8,465)
Total Abbott Shareholders' Investment
31,088
30,524
Noncontrolling interests in subsidiaries
213
198
Total Shareholders' Investment
31,301
30,722
2$
67,887
$ 67,173
The accompanying notes to consolidated financial statements are an integral part of this statement.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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