Based upon your research and analysis of Pfizer company’s financial information. You should identify at least 5-7 significant points that justify your conclusion. Support your points with a comprehensive explanation incorporating sound reasoning.
Your final written paper should be 4-5 pages long. The report should be well written with cover page, introduction, the body of the paper (with appropriate subheadings), conclusion, and reference page. References must be appropriately cited. Format: Double-spaced, one-inch margins, using a 12-point Times New Roman font.
The definitions and equations for different proportions used to figure according to Pfizer’s Income Statement, Balance Sheet, and Cash Flow are recorded beneath.
The debt ratio is the financial measure that assesses a organizations financial leverage. The total debt ratio to all assets is called as the debt-to-asset ratio.
Total Liabilities/ Total Assets
Gross Profit Margin
The difference between revenue and cost of goods sold divided by revenue is the profit margin. The measure is used to evaluate a company’s financial health and business strategy since it shows how much money is left over after sales (Tuck, 2019).
Revenue – COG/ Revenue
Free Cash Flow
This is the measure that allows the organization to calculate its cash flow and understand how much cash is available for the distribution to the organization’s stockholders.
Operating Cash Flow – Capital Expenditure
Times Interest Earned
This is the interest coverage ratio, or the times interest generated, is a measure that calculates an organization’s capacity to decide its debt obligations. It’s calculated by dividing EBIT or EBITDA by interest expense.
Accounts Receivable Turnover
This means an accounting statistic that calculates how successful a compant is at extending financial credit and collecting debt.
Total Turnover/Average Receivables
This means accounting metric that counts how much times inventory is sold or used in a particular time frame.
Industry average for current ratio is 5.36. Pfizer has very low current ratio compared to the average ratio.
The average debt ratio for the pharmaceutical industry is 0.34, comparatively Pfizer has more debt ratio than the industry average across the country.
Gross Profit Margin
For the financial year of 2020, the industry average is 0.72 which is less than the gross profit margin of Pfizer (0.79).
|Gross Profit Margin||0.79|
Times Interest Earned
Industry average is 5.61 times and Pfizer has a greater value than the industry average
|Times Interest Earned||6.17|
Accounts Receivable Turnover
Industry average is 4.48 for AR turnover and Pfizer has a lesser value for this ratio.
|Accounts Receivable (Asset)||154,229,000|
|Net Credit Sales||1,784,000|
|Accounts receivable turnover||0.012|
Industry average for return on sales is -1.6 while Pfizer has 0.27.
Industry average for asset turnover ratio is 1.53 while Pfizer has 0.27.
Industry average for financial leverage ratio is 1.65 while Pfizer has 2.43.
Industry average for financial leverage ratio is -7.0 while Pfizer has 6.64.
Industry average for financial leverage ratio is 9.51 while Pfizer has 14.0
|Net Sales or Total revenue||41,908,000|
|Return on Sales||0.27|
This is a metric of an organization’s industry success. We can foresee the profitability of a firm by using the profitability ratio. This profitability ratio determines how profit is generated in relation to sales, net worth and net assets.
Based on the values provided for the Pfizer for the years 2019 and 2020:
· In 2019, Pfizer was profitable in the aspects of revenue, total assets, and gross profit.
· In 2020, Pfizer was profitable in the aspects of revenue, total assets, and gross profit.
The receivables and inventory of a company are used to find if it is a bettwr investment or not. Keeping inventory levels less will make the company efficient since it is the inventory that will be aligned with sales.
Pfizer’s revenue in 2020 was 41,908,000 dollars. Pfizer’s revenue in 2019 was 51,750,000 dollars.
Pfizer’s inventory in 2019 was 53,715,000 dollars. Pfizer’s inventory in 2020 was 50,982,000 dollars.
Since the inventory figures are lower than the revenue, we can say that Pfizer was efficient in 2019 and 2020.
Liquidity is called as the ability to meet the short-term financial obligations. The liquidity ratio calculates a company’s capacity to meet its debt obligations. And that is calculated by comparing a firm’s cash-convertible liquid assets.
Pfizer’s short-term debt was 1,537,000 dollars in 2019. Pfizer’s short-term debt was 2,012,000 dollars in 2020.
As the short debt money are lower than the income, the company can meet its short term debts, and indicating that the liquidity levels are adequate.
Solvency means a company’s ability to pay down long-term debts, which includes interest.
Pfizer’s long-term debt was 16,342,000 dollars in 2019. Pfizer’s long-term debt was 21,535,000 dollars in 2020.
Assets-Liabilities are also considered when calculating the net worth.
Pfizer’s net worth in 2019 was 14,387,000 dollars. Pfizer’s net worth in 2020 was 12,292,000 dollars.
As the long term debt amounts are more than the net value, the organization’s capacity to pay back its long-term obligations is very limited, which means that the company is not effectively solvent.
Gross Profit Margin Definition, Formula, Calculation, and Example. Investing Answers. (n.d.). Retrieved July 22, 2021, from https://investinganswers.com/dictionary/grossprofitmargin
Tuck, J. (2019, February 5). Definition of Net Worth in Accounting. Retrieved July 22, 2021, from https://smallbusiness.chron.com/definition-net-worth-accounting-24909.html
What is profitability? (n.d.). Retrieved July 22, 2021, from https://www.investopedia.com/terms/d/debtratio.asp
Running Head: Pfizer Inc. 1
The formality of financial statements provided a great avenue to consider the health of a company and thus its activities in terms of positioning in the market. The value that it adds is the relevance of the statement to answering basic question functional of several variables that are interconnected for the business in a structured way that can easily be understood. Pfizer is a biotechnological and pharmaceutical specializing corporation that trades publicly. The data uses in the following discussion is obtained from NYSE and the currency calculated in USD.
Computation and Ratio Trend Analysis
The following is PFE data used in the calculations for debt ratio, gross profit margin, free cash flow, times interest earned, accounts receivable turnover, and inventory turnover (NYSE., n.d).
The debt ratio is given by Total liabilities ÷ Total Assets as obtained from the balance sheet for 2019, and 2020.
Gross Profit Margin
Gross profit margin is given by gross profit ÷ total revenue as obtained from the income statement 2019, and 2020.
|Gross Profit Margin||0.79||0.80|
Inconsideration f the fact that there is an observable decline in the ratio, it can be said that it is indicative of a relatively more risk due to arising problems that could be due to price change, unit volume sales, cost of labor, or a change in fixed overhead or variable overhead that has been incurred. The issue at hand is to delve into understanding the variable that could lead to this decline. Following the fact that COVI-19 affected the 2020 work environment. A reasonable drop by 0.01 is expected and fairly negligible but it needs to be watched (AccountingTools, 2021).
Free Cash Flow
Free Cash Flow is given by Operating Cashflow – Capital Expenditure as obtained from the cash flow Statement for 2019, and 2020.
|Operating Cash Flow||14,403,000||12,588,000|
|Free Cash Flow||17,194,000||15,182,000|
The impact is in consideration of this calculation is the determination of unconstrained cash in eth company. As such, looking at the stronger rise in its availability over one year, PFE can generate its internal growth and thus the realization of profits to its shareholders. The positive number is indicative of proper cash management and thus a balance in the return of investments hence no need for an increase in debt financing which is promising (Goel, 2015).
Times Interest Earned
Times interest earned is given by the ratio of earnings before interest and taxes (EBIT) and the earnings periodic interest expense obtained from the incomes statement for 2019 and 2020.
|Times Interest Earned||6.17||12.23|
Considering that it is a solvency ratio, a higher ratio is indicative of a stringer ability of the company to make debts and interest payments hence a stronger performing company. As such, the decline from 2019 to 2020 shows that the company has become weaker compared to fulfill its payment. Therefore, there is more risk of investment if this number continues to fall. The fall is indicative of going bankrupt which is something that should be watched to determine the ability of creditors to provide additional funding for operation when required.
Accounts Receivable Turnover
Accounts receivable turnover is given as a ratio of net credit sales (gross credit sales – returns) and average accounts receivable with 2019 and 2020 data.
|Net Credit Sales||1,784,000||1,305,000|
|Accounts receivable turnover||0.012||0.008|
This is an indication of credit sales and receivables quality hence in 2019, credit was frequently collected as compared to 2020 which has seen lower credit collection scores. This shows a better performance in terms of the credit score and thus well-managed use of the borrowed funding.
Inventory turnover is given by the Cost of goods sold ÷ average inventory for the eyars 2019 and 2020.
|Cost of Goods Sold (Operating expenses)||25,063,000||24,456,000|
Characteristically, the higher turnover in 20220 indicates that the company is selling the PFE products quickly and thus a significant demand for the said product. This small rise shows a proper management of stock such that there is no overestimation of demand and thus no purchasing of too many good. In addition, there is a strong relationship between the sales and purchasing department hence optimization of resources.
DuPont Analysis of ROE
First, there is a need to calculate the Return of Equity (ROE) which is given by
(Net income ÷ Equity)
Which can be calculated as
Net income ÷ [(Shareholder Equity 2019 + Shareholder Equity 2020)/2].
DuPont Analysis is given by the ratio of net income and equity in the given year which can be found by (Net income ÷ Sales or Revenue) X (Sales ÷ Assets) X (Asset ÷ Equity) that can also be considered as Return on Sales X Asset Turnover X Leverage (Hargrave & Drury, 2021).
|Net Sales or Total revenue||41,908,000||51,750,000|
|Return on Sales||0.27||0.19|
|Du Point Analysis||0.18||0.16|
There is a significant decline in the return of sales and asset turnover from 2019 to 2020 which affects the decomposition of the return of equity and thus operational efficiency in the competitive market. The indication is that the company has grown relatively weaker from 2019 to 2020 and thus a threatened opportunity in terms of investment. PFE, therefore, is not making better use of its assets and its profit margins are declining hence a higher risk investment (Hargrave & Drury, 2021).
Based on the provided data revenue in 2020 is lower than in 2019, the gross profit is also lower, the operating cash flow is higher, but the gross profit margin has also reduced. There is an indication that the company profitability is deteriorating compared to the last year. Relatively the significance is low and thus a promising potential for better recovery in 2021. According to the TTM financial data of PFE, currently, the gross profit is at 35,444,000 a notable trend of increasing recovery from last year. Based on expected fluctuations and the socio-economic difficulties in the current market, PFE is on track to maintaining profitability in the long run.
In terms of liquidity, the company has realized a higher cash flow in 2020 compared to the previous year. This is indicative of financial management within the organization and thus a better chance of recovery n the long run. At the same time, it is showing signs of self-funding easily available and thus the decrease in TIE is not alarming. However, from the creditors’ viewpoint, the decreased solvency is relatively a ‘cautionable’ look at the company as there is twice the increased risk due to the halved TIE between 2019 and 2020. The assessment would need a higher commitment to allow borrowing especially with the reduction in total assets.
Suggestion for Ratio Improvement
PFE is a biochemistry funding and recognition of the market niche at this time is essential There is a need for the company to assess its employees and product branding. The most telling aspect of the ratio is a change in the volume of sales. This means that there were fewer products sold and thus a definitive recognition of an issue with the product or its distribution. It is important that the company reassess the product branding and its reachability to their specific niche and thus reevaluation of sales strategy. This can be done through market analysis and revitalization of the marketing hence a newer approach to service and product delivery. However, this implementation can only be completed after verification and auditing to determine whether there were no errors in the financial statements.
The financial ratios are tale-tell signs of the health of the company and based on the PFE data, there is a decline in its performance from 2019 to 2020. This decline shows the fluctuation that is expected due to the pandemic. However, the numbers to observe are the gross profit margin and the debt ratio. A significant decline in these two causes tension in the stock exchange and affects the stock pricing hence shareholder position in investment and the evaluation of return of investment. However, the significance is low and a further performance evaluation in five years needs to be assessed to determine the actual performance health. A significant decline that is progressive over the years could be detrimental but a fluctuation in the last two years is expected especially because of the COVID-19 crisis.
AccountingTools. (2021). Gross profit analysis. Gross profit analysis — AccountingTools
Goel, S. (2015). Financial Ratios. Business Expert Press.
Hargrave, M. & Drury, A. (2021). DuPont Analysis. Investopedia. https://www.investopedia.com/terms/d/dupontanalysis.asp
NYSE. (n.d). Pfizer Inc. (PFE). https://finance.yahoo.com/quote/PFE/balance-sheet?p=PFE
Running Head: Pfizer Inc. 1
Pfizer Inc. 2
The Pfizer Inc. firm is known for operating as a company that is pharmaceutical. It is an institution that provides vaccines, medicines, medical gadgets in addition to products for consumer healthcare for inflammation, oncology, cardiovascular as well as additional areas that are therapeutic. The firm is famous for serving consumers globally. It is considered to be among the globe’s largest pharmaceuticals companies that are based on research, it produces medicines meant for metabolism, immunology, cardiovascular health, inflammation in addition to oncology among others. They have approximately ten products that end up fetching an estimate of $1 billion and more within yearly revenue. The company’s products that are top prescription comprise of drugs for pain management, Lipitor for lowering cholesterol, drugs for pain management Lyrics and Celebrex, pneumonia vaccine Prevnar, in addition to treatment for erectile dysfunction viagra, Enbrel drugs for arthritis, Zyvox antibiotics plus Eliquis a blood thinner. This firm is also famous for making as well as selling drugs that are generic as well as products for consumer health. Pfizer Inc. has its operations global in addition to it getting approximately 55% of its own revenue from clients who are international (Genovese, et.al, 2020).
Pfizer carries its own operations via three enterprise segments which mainly are: Upjohn, Pfizer Group of Biopharmaceuticals and the Healthcare for Consumer. The Biopharma happens to be the segment that is largest which accounts for approximately 75% of the revenue. It is basically a medicines business that is based on science comprising of six units of business. They are; inflammation and immunology, Hospital, Oncology, Rare Disease, Vaccines as well as internal medicine. The unit of the Hospital tends to commercialize the portfolio global of anti-infective and injectable sterile medicines and comprises of the manufacturing operation contract of Pfizer, the centreone of Pfizer.
The section of the Upjohn brings an estimate of 20% revenue. It is a worldwide, basically off-patent branded in addition to generic business of medicines, which comprises of a portfolio of twenty worldwide identified solid dose brands that are oral, in addition to genetics platforms that are US based, in Greenstone. The Upjohn commodities are utilized in treating diseases that are non-communicable across an extensive range of areas that are therapeutic inclusive of pain plus neurology, cardiovascular, urology, psychiatry in addition to Ophthalmology. The firm at present has approximately ten blockbusters or commodities that tend to bring over $1 billion in form of revenue. Additionally, the firm is aiming to launch blockbusters that are new from its R&D pipeline that is robust so as to compensate for the off-patent losses. It has approximately 95 projects within the clinical development phases. The company merged its health operations of a consumer, inclusive of brands that are leading such as Centrum, Advil, Robitussin with the ones of the GlaxoSmithKline within the year 2019. The firm retains over 30% stake within the joint venture (Dougados, et.al, 2020)
Brief Historical Summary
The Pfizer Inc. is known to have been founded in the year 1849. The founders were two German recent immigrants to the United States of America, known as Charles Erhart in addition to Charles Pfizer. The two of them were within their mid-twenties, they ended up setting what was at first a fine business of chemicals within the Brooklyn factory, through the use of a loan from the father of Pfizer which acted as the capital for startup. The first product of the firm was an anti-parasitic drug that is palatable, which was made having the taste of coffee, which was a unison of the skills of Pfizer who was a chemist and the skills of Erhart who had the training of a confectioner. This became a success, in addition to it setting the sequence for the future development of the company.
The American Civil war convulsion, that started shortly after in the year 1862, is known to have been greatly influential on the industry of nascent pharmaceutical same as the American society generally. The initial industrial war mainly comprised of producers of drugs as much as the manufacturers of weapons. Sane as Squibb, their competitor, the abrupt essence for massive painkillers quantities in addition to antiseptics since the Union armies offered a scope that is extensive for the expansion of production. By the year 1868, the revenue of the firm had already doubled since the war started, in addition to their lines of product had greatly expanded.
When the war ended, Pfizer still focused on chemicals that were industrial same as the medicines, they produced the citric acid essential for the soft drinks emerging industry, fueling brands such as Dr Pepper as well as Coca Cola expansion within the 1880s. This ended up being their core stay for lots of years, which laid the foundation for their consistent growth. In addition, when the tartaric acid supply got disrupted because of the increased tariffs as well as civil war, Pfizer ended up developing its production so as to be the leading chemicals supplier within United States.
Their expertise within fermentation as well as large-scale production pharmaceutical placed Pfizer within good stead in the year 1941, the government of the United States got to appeal to the industry of pharmaceutical for support within the penicillin production for the war attempt. In a collaboration that is unprecedented, Pfizer operated with the scientists of the government, and researchers like Fredrick Banting known to have been operating on the drug prior to the start of war in addition to a plethora of additional players within the industry with an aim of enhancing the drug production efficiency, as it stated proudly, that lots of the penicillin that was used by the Allied Force on the final day was actually made by the Pfizer firm. Antibiotics ended up marking the modern Pfizer transition.
The firm got to initiate its initial core internationalism within this phase, which resulted into them moving to nine countries that were new in the year 1951. Perhaps not surprising for the organization that is the largest among the industries that are considered the biggest globally. Pfizer is also known for being proficient when it comes to exerting its political influence that is considerable so as to have their interests preserved, which made it to be ranked as the 6th largest Washington lobbier, as well as spending $ 25 US million to lobby when passing the healthcare reform of Obama legislation only. It has been on the frontline in having the counterfeit drugs are pushed up the agenda that is political, partly because of its ownership of Viagra, which is the drug that is most counterfeited. Additionally, it is also known for been extremely crucial of trade that is parallel, as well as been among the parties militating for a repackaging ban that is pharmaceutical within the EU. Regardless of the political clout, the firm has also made attempts the have its image belayed in form of a pharma monster, same to many more within the industry, through generously spending on charity, by donating drugs for AIDS to the developing countries as well as the communities that are poor in the United States (Markman, et.al, 2020).
The major competitors of the Pfizer company are Novartis AG, Bristol Myers Squibb, Merck & Co, as well as Johnson & Johnson.
Merck & Co in addition to Pfizer are known to be giants within the industry of pharmaceutical. Though Merck &Co. is said to be on a revenue growth that is accelerated within the previous several years, on the other hand, Pfizer has not had any growth that is significant. Actually, it can be said that it is on a decline ever since the Lyrica patent protection ended. In addition, Merck’s portfolio is bigger for the drugs of cancer as compared to Pfizer. Currently, Pfizer is said to be the largest company of pharmaceuticals globally, however, Merck is making attempts to have the gap bridged.
Novartis AG is being projected to end up becoming the pharmaceutical company that is leading globally by the year 2024. The previous year, the firm ended up acquiring the Medicines Co. as well as added its drug that is experimental. However, Pfizer is working towards ensuring that it does not give up the spot that is at the top without fighting for it. It has a drug for cancer known as Ibrance, has been expected to be among the cancer drugs that are top five by the year 2022. Its disease drug that is autoimmune known as Xeljianz, is one that is receiving projections that are positive.
The Bristol-Myers Squibb is one that is known for making approximately half of the Pfizer earnings of the year 2019. However, it’s growth within the recent years is one that is massive. Its strength within the industry has not been lost on Pfizer. These two companies have had an opportunity of partnering so as to develop in addition to producing apixaban. The drug is anticoagulant that got to be identified by Bristol-Myers Squibb. In addition, Pfizer has an intention of acquiring the company.
The GSK basically is ranked to be the pharmaceutical firm that is fifth global, that is four numbers below the Pfizer company. However, in the past year, both firms merged their consumer businesses of healthcare to one joint venture, whereby the GSK holds a stake of 68%. This particular venture is currently the portfolio that is largest globally regarding over the counter supplements, vitamins, medicines in addition to minerals. This will be in operation for three years prior to its expiry.
The position of Pfizer company in the industry
Pfizer is considered to be the pharmaceutical company that is ranked third globally depending on the revenue of prescription drug. This company that is based in New York happened to generate 42 U.S billion dollars of the overall revenue in the year of 2020. In the year of 2020, the firm was one of the top five pharma that is most valuable as well as biotech organizations plus a market capitalization of approximately 200 United States, billion dollars. The Pfizer firm got to manage a few of the pharmaceutical products that are best-selling globally.
Recent developments in the firm
In the process of fighting against the COVID-19 pandemic, vaccine is a part that is crucial in addressing the worldwide health crisis through minimizing the infection rates, disease as well as death globally. BioNTech as well as Pfizer have ended up leveraging scientific expertise of decades into designing as well as executing a phase three rigorous clinical trial programs into ensuring the vaccine is present within the fastest as well as secure. The given vaccine is yet to be approved of get licensed by FDA of America though it had been allowed to get used within an emergency so as to have the Corona pandemic prevented, it is to be used in people who are 12yeard and above. Its emergency usage has only gotten authorized for the period of declaration that situations in existence justify the authorization of use that is emergency of the particular medical product (Schneeberger, et.al,2020).
The most appropriate means of predicting what will occur with Pfizer is through observing the current circumstances and make efforts of predicting the present trends with high probabilities of going on. Arguably, the factor that is most essential is putting into consideration the results of the firm will not get dragged down through the sales that are declining of its initial drugs that are older and off-patent.
The firm will get to deliver revenue growth that is annual of approximately 6% on a basis that is risk adjusted, across the coming five years with earnings that are adjusted per share enhancing on a 10% basis each year. The said targets basically appear to be ones that can be attained. The company mainly has various solid growth drivers, more so including Vyndaqel known to be approved for the treatment of the genetic disease that is rare, identified as transthyretin amyloid cardiomyopathy in addition to thinners of blood by the name of Eliquis.
The revenue of the Pfizer firm for last twelve months was over on 31st March in the year 2020, having $ 46.407 B, which is an increment of 21.68% on a yearly basis. The end of year revenue for Pfizer happens to be $41.908 B, which is an increment from 1.79%
In conclusion, Pfizer is said that it is 95% effective when it comes to prevention of an infection in the individuals without any prior infections. In addition, the Covid-19 vaccine fronts firm is safe as well as effective, even when it is against most virus variants. The firm has all its focus on preparing medicines as well treatments that are appropriate for individuals. It is also a company that practices charity events within the community.
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