Phase 2: Ratio Analysis
Given below are the financial ratios of the company:
| Financial Ratios Analysis | |||||||||
|
Year |
2013 |
2012 |
2011 |
2010 |
2009 |
||||
|
Gross profit Margin |
81.42% |
82.03% |
83.86% |
82% |
88.79% |
||||
|
Operating Profit Margin |
30.47% |
20.57% |
20.16% |
15.38% |
23.38% |
||||
|
Net Profit Margin |
42.65% |
26.66% |
16.40% |
13.41% |
18.64% |
||||
|
Free Cash flow Ratio |
31.60% |
28.04% |
30.44% |
16.14% |
33.21% |
||||
|
Current Ratio |
2.41 |
2.15 |
2.06 |
2.11 |
1.66 |
||||
|
Quick Ratio |
1.79 |
1.58 |
1.44 |
1.51 |
1.12 |
||||
|
Interest Coverage Ratio |
11.11 |
7.39 |
6.83 |
5.26 |
8.70 |
||||
|
Long-term debt to equity Ratio |
0.398 |
0.380 |
0.423 |
0.435 |
0.478 |
||||
|
Return on Invested Capital |
28.72% |
17.84% |
12.11% |
9.35% |
9.55% |
||||
The gross profit margin ratio of the Pfizer Inc. has decreased in the year 2013 than the previous four years from 2009 to 2012 as in 2009 it was 88.79% but in 2013 it decreased to 81.42% indicating the decline in the gross profit margin of the company. On the other hand, operating profit margin ratio of Pfizer Inc. has increased in the year 2013 than the previous four years from 2009 to 2012 as in 2009 it was 23.38% however, in 2013 it increased to 30.47% indicating the enhancement in the operating profit margin of the company.
Similarly, net profit margin ratio of Pfizer Inc. has increased in the year 2013 as compared to the previous four years from 2009 to 2012, as in 2009 it was 18.64%however, in 2013 it increased to 42.65% indicating the development in the net profit margin of the company.
Furthermore, free cash flow ratio of the Pfizer Inc. has increased in the year 2013 than the previous three years (2010-2012), in 2012 it was 28.04% and in 2013 it increased to 31.60% which indicated the development in the net profit margin of the company. However from the year 2009, free cash flow ratio of Pfizer Inc. decreased in the year 2013, in 2009 it was 33.21% and in 2013 it slightly reduced to 31.60%.
However, the return on invested capital ratio has indicated the increase for the year 2013 as compared to the last four years. In 2009 it was 9.55% while in 2013 this ratio increased to 28.72% indicating that the company is generating a sufficient gain for their shareholders.
The liquidity ratios are analyzed in order to determine the financial position of the company in the industry as compared to its competitors. From the analysis of the liquidity ratios it is concluded that the current ratio of the company has increased in the year 2013 as compared to the previous four years. The current ratio of the Pfizer Inc. in 2009 was 1.66 but in 2013 it increased to 2.41.
Since the current ratio of 2:1 is considered ideal therefore, the current ratio of the company indicating that Pfizer Inc. has enough current assets that can pay off its current liabilities in the future.
Similarly, the quick ratio of the company has also increased in 2013 as compared to the previous four years as in 2009 it was 1.12 whereas, it increased to 1.79 in the year 2013 reflecting the assets of the firm which can easily converted into cash and are enough to pay off its liabilities. The idea quick ratio for a firm can be 1:1.
However, the liquidity position of Pfizer Inc. is satisfactory during the period from 2009 to 2013. Both quick and current ratios demonstrate that the company has good liquidity position in the industry during the 5 year period as compared to its major competitors in the industry.
Moreover, the interest coverage ratio of Pfizer Inc. during the period of five years from 2009-2013 has indicated the increment. In 2009, the interest coverage ratio was 8.70 which increased to 11.11 in 2013. The increment in the Interest coverage ratio indicated that the company had no cash related issues. Whereas, Long-term debt to Equity ratio of the company showed the falling trend as it decreased from the year 2009 till 2013, in 2009 it was 0.478 and later on it decreased to 0.398 in 2013.
The liquidity position of the company has given it a competitive advantage over other major players in the industry (Appendix 2 & 3). The appendix 2 and 3 show the performance of Pfizer Inc. against its major competitors as well as against the average sector and the industry performance.......................................
This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.
Related Case Solutions & Analyses:
Executive Stock Option Repricing: Retention and Performance Reconsidered
Samsung Electronics Semiconductor Division (A)
Staples: Year in the Life of a Start-Up
EUROCAP Bank: Bonuses Driving Performance or Driving Discontent
Teaming for Time: The 6 AM Delivery Project at The Boston Globe (A)
An Inspired Model: Oprah Winfrey Case
Axel Springer in 2014: Strategic Leadership of the Digital Transformation
In the Crossfire: Guns, Legislative Leadership and Recall Politics in Colorado
Yamato Transport Co. Ltd.: TA-Q-BIN
Du Pont’s Titanium Dioxide Business (F)
