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Instructions
Required Organization of Paper:
The following subheadings are to be used and the following topics must be addressed in the paper:
Introduction – The introduction needs to review the assignment or
purpose of the paper. It also needs to include an overview of the
contents that follow.
Presentation of the Ratio Analysis – The student should develop and
present the ratio analysis for the company. It must include data for at
least the most recent 3 years. Additional years should be included if
available. The ratio data must include appropriate Solvency,
Profitability, Activity, Capitalization, and Market Ratios.
It is necessary to prepare and incorporate a table(s) (tables are always
numbered, titled, and show the source of the information) of the
relevant criteria being examined in the ratio analysis and their present
status. There must be comparisons to competitors or industry standards.
Additional information can be included in the table. These data are to
be presented in a table (numbered and titled and that shows the
sources). The data are then to be discussed and explained in an
accompanying written analysis.
Strengths and Weaknesses Analysis – This section needs to present a
careful analysis of the strengths and weaknesses demonstrated by the
ratio analysis. This section needs to conclude with a paragraph or two
that explain and interpret what the analysis means on an overall basis
and as the observations and conclusions are considered collectively.
Summary – Prepare a brief summary of the analysis and key findings.
References – Must clearly demonstrate use of a variety of the assigned readings and supplemental material.
Completeness of analysis:
The analysis must demonstrate understanding of financial ratio analysis.
Use of academic and professional databases, business periodicals,
analyst reports, and news articles, such as those in the UMUC library,
must be included in this company accounting analysis.
Example Paper for Homework Help:
The financial performance is assessed by comparing the current performance to the
previous year and with the industry benchmark. One financial tool used to aid the comparison of
the financial statement is the ratio analysis. Easton et al. (2018) define ratio analysis as a method
used to gain insight into a company's performance by studying its financial statements. A
SWOT analysis also helps understand the firm performance. The company chosen for ratio and
SWOT analysis is Pfizer corporation. Pfizer is a multinational pharmaceutical corporation ranked
64th on the 2020 Fortune 500 companies. The corporation majors in the manufacture of medicine
and vaccines. An analysis of Pfizer envisions using three-year period ratios and a SWOT model
to determine how the company has been performing in recent periods.
Ratio Analysis
Ratio analysis computes ratios to compare a firm performance in the current year to
previous years' performance. The ratios computed for Pfizer assess profitability, liquidity,
solvency, and management’s efficiency.
Profitability Ratios
They are ratios that measure the management's effectiveness by showing the returns
generated on sales and investment. The profitability ratios computed for Pfizer corporation are
gross margin and net income margin ratios (Pfizer Inc., 2021). Table 1 below indicates that Pfizer
is mildly profitable compared to its peers. The gross profit margin averaged 79% over the past
three years, indicating that the firm had minimized production costs to match the peer firm's cost.
The gross margin was higher than the industry, indicating that the firm managed production costs
well as the revenue grew.
On the other hand, the net margin was very low. The ratio increased from 20.84% to
31.49% in 2019. The ratio declined to 16.75% as the expenses increased in the year. The
pandemic affected the industry's operations, reducing the revenue and increasing the costs hence
the -212.65% benchmark.
Table1: Pfizer Profitability Ratios
Solvency Ratios
The ratios measure the extent to which a company uses its assets financed by
non-owner-supplied funds or debt. They indicate the financial risk of the company. Table 2
below show that the firm solvency is high since the ratios are above average. The debt-to-equity
ratio increased from 1.50 in 2018 to 1.64 in 2019. Which allowed the firm to acquire more assets
for use in the manufacturing process. The ratio later dropped to 1.43 in 2020, which was a good
indicator for the shareholders as the amount saved on interest will be share as a dividend.
The industry comparison shows the firm is operating well since most of the firms are
financed by debt which is indicated by the 1.45 ratio. On the other hand, the long-term debt has
dominated the firm capital structure, indicating that the firm has a high risk of solvency. The
ratio grew from 0.52 to 0.59 in 2020. The ratio compared to the industry shows the firm is safer
as the benchmark is higher.
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Gross margin ratio = Gross Profit/Total Revenue
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Net profit margin = Net Income/ Sales
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Table 2: Pfizer Solvency Ratios
Liquidity Ratios
The ratios measure a firm's ability to meet its short-term obligations as and when they fall
due. Table 3 below indicate that Pfizer is liquid since the ratio is above one. The quick asset ratio
declined from 1.31 in 2018 to 0.69 in 2019 (Pfizer Inc., 2021). The drop was due to the low
assets remaining after the inventory is used up. However, in 2020 the ratio increased to 1.04. the
increase in the current assets in 2020 allowed the firm to solve the short-term obligation as they
arise. Compared with industry, Pfizer’s liquidity is lower since the industry ratio is 2.06. Hence,
the firm will need to improve its current asset by collecting account receivables (Pfizer, 2021).
The current ratio also displayed a similar trend by dropping in 2019 and later increasing the
following year. However, the ratio is still lower than the 2.73 industrial benchmarks.
Table 3: Pfizer Liquidity Ratios
Activity/ Efficiency Ratios
The ratio measures the efficiency with which a firm uses the available assets to generate
sales. The turnover ratios also indicate the rate at which assets are converted into sales. Table 4
below shows that Pfizer's activities were low; hence, the three years' returns declined. The total
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Debt to Equity = Total Debt/ Shareholder Equity
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LT Debt to Equity = Long Term Debt/ Total Equity
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asset turnover ratio declined from 0.34 in 2018 to 0.27 in 2020. On the other hand, the debtor
turnover ratio declined from 6.68 in 2018 to 4.02 in 2020. The decline was due to a more
extended debt collection period, increase inventory holding, and increased credit. Compared to
the industry ratio, the firm’s debtors and assets turnover were low as the benchmarks stood at
6.68 and 0.62, respectively.
Table 4: Pfizer Activity Ratios
Pfizer Strengths and Weaknesses Analysis
Pfizer's operation in the pharmaceutical industry has varied based on the internal strength
and strains that the firm faces. The SWOT model can be used to analyze the internal factors
affecting the firm over the past three years.
Strength
Pfizer draws its strengths its Market leadership. According to the ranking by fortune500,
Pfizer was ranked 64th world's largest public trading company (Fortune., 2020). The firm was
also ranked the second-largest pharmaceutical company based on revenue in 2020. In the years,
the firm managed to generate revenue amounting to $50 billion annually. As of April 2021, it has
a market capitalization of $207.28 billion. The other sources of strength are research and
development. Pfizer has allocated a research and development budget amounting to $8 billion;
the funding is the highest in the industry, allowing the firm to undertake more research than its
peers. Pfizer specializes in developing vaccines and medicines across a wide range of medical
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Debtor’s turnover = Net Sales/ average debtors
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Assets Turnover = Net Sales/ Total Assets
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fields as the budget covers the cost-effectively. The primary firm products include immunology,
oncology, cardiology, and neurology.
The other source of strength is its rich historical background. Pfizer was incorporated in
1849 as a chemical company. Over the next 170-year management has developed organization
policy and networking. With over 170 years of experience, Pfizer has evolved from a
one-stop-shop to a multinational pharmaceutical corporation. Another strength is Brand
recognition and uniqueness. Pfizer prides itself on being the producer and marketer of a series of
brands and products recognized worldwide. The products include Advil, Viagra, Xanax, EpiPen,
and Nexium24HR. Finally, the firm benefited from the effective Covid-19 response. Pfizer has
been on the front line in developing testing and mass-production of the Covid-19 vaccine.
Analysts have stated that the firm was the fastest in developing the vaccine that has ever been
approved, rolled out, and mass-administered to the public. The response has been marked as the
fastest response to a pandemic in recent times.
Weakness
Pfizer's operation has not been without strains. The first weakness is a series of Drug
lawsuits. Pfizer has been sued on several occasions, mainly for medical injuries caused by
negligence in producing some of its more popular products. The firm is in records as the
company which has paid the largest fine paid for a healthcare fraud lawsuit. Pfizer paid $2.3
billion in fines, penalties, and settlements for illegal marketing of its product and misinformation
(Gürel & Tat, 2017). Another weakness is the Vaccine supply issues. Pfizer has not been able to
suppress the delivery quotas for the initial doses of the coronavirus vaccine by the end of 2020.
The delay forced Congress to scrutinize the process of vaccine development and delivery, which
further slowed the process. The scrutiny noted that the firm benefited from increased federal
funding to mass-produce the vaccine immediately upon approval, but the firm could not meet the
standards.
The analysis indicates the Pfizer's strengths have grown over the year, positioning it high
in the market. The strengths have seen the government entrust it with the mass production of the
Covid-19 vaccines (Gürel & Tat, 2017). However, the firm will need to work on the weak strain
to ensure the public image is maintained. The management will have to reassess the department
for accountability and efficiency in meeting the set deadlines.
Summary
Pfizer corporation's performance over the past three years is admirable as it indicates a
growing trend despite the effects of the pandemic. The government's vast funding to
mass-produce the vaccine has allowed the firm to pay up debts and accumulate assets. The
financial ratio and swot analysis indicate that the firm performance better, but there is room for
improvement in the coming years.
References
Easton, P. D., McAnally, M. L., Sommers, G. A., & Zhang, X. J. (2018). Financial statement analysis & valuation. Boston, MA: Cambridge Business Publishers.
Fortune. (2020). Pfizer | 2020 Fortune 500. Fortune. https://fortune.com/company/pfizer/fortune500/.
Gürel, E., & Tat, M. (2017). SWOT Analysis: A Theoretical Review. Journal of International Social Research, 10(51).
Pfizer (PFE), P. (2021). Pfizer (PFE) Financial Ratios. Investing.com. https://www.investing.com/equities/pfizer-ratios.
Pfizer Inc. (2021). Pfizer Inc. - Financials - Quarterly Reports. Investors.pfizer.com. https://investors.pfizer.com/financials/quarterly-reports/default.aspx.
Full Instructions:
RESEARCH PROJECT #2
Ratio Analysis
This project is closely aligned with the Course Outcomes and Finance Program Objectives. Completion of this project can be used as part of a portfolio to show potential employers the student is skilled at performing company valuations and financial statement analysis and can be included on the student's resume.
Evaluation: The Project #2 is 15% of final course grade.
No more than 20% of the text of the project should be made up of quotes.
For this assignment, use the company PFIZER
Assuming the role of an entering corporate officer, complete a financial ratio analysis for the company assigned for you by your instructor. The Ratio Analysis Project based on the Week 3 and Week 4 assigned readings and other materials that can be located.
This analysis should reflect a review of at least a three-year period of fiscal years ending with the most recently published Form 10K report.
Writing Instructions:
The discussion portion of the analysis should be three to five pages in length, double spaced, and should employ APA style and format for reference citations. Supporting data (e.g., figures, tables, etc.) and references should be limited to four separate items preferably presented in the written analysis.
Please note that starting from the Fall 2020 semester the UMGC moved to the 7th Edition of the APA Style. The links to the 7th Edition of the APA Style methodology are posted in Content – Course Resources – Writing Resources.
Required Organization of Paper:
The following subheadings are to be used and the following topics must be addressed in the paper:
Introduction – The introduction needs to review the assignment or purpose of the paper. It also needs to include an overview of the contents that follow.
Presentation of the Ratio Analysis – The student should develop and present the ratio analysis for the company. It must include data for at least the most recent 3 years. Additional years should be included if available. The ratio data must include appropriate Solvency, Profitability, Activity, Capitalization, and Market Ratios.
It is necessary to prepare and incorporate a table(s) (tables are always numbered, titled, and show the source of the information) of the relevant criteria being examined in the ratio analysis and their present status. There must be comparisons to competitors or industry standards. Additional information can be included in the table. These data are to be presented in a table (numbered and titled and that shows the sources). The data are then to be discussed and explained in an accompanying written analysis.
Strengths and Weaknesses Analysis – This section needs to present a careful analysis of the strengths and weaknesses demonstrated by the ratio analysis. This section needs to conclude with a paragraph or two that explain and interpret what the analysis means on an overall basis and as the observations and conclusions are considered collectively.
Summary – Prepare a brief summary of the analysis and key findings.
References – Must clearly demonstrate use of a variety of the assigned readings and supplemental material.
Completeness of analysis:
The analysis must demonstrate understanding of financial ratio analysis. Use of academic and professional databases, business periodicals, analyst reports, and news articles, such as those in the UMUC library, must be included in this company accounting analysis.
Organization:
The paper should be well-organized and follow a logical pattern of analysis and discussion.
Presentation:
Papers should meet professional business standards and meet APA formatting requirements. No more than 20% of the text of the project should be made up of quotes.
Please note that starting from the Fall 2020 semester the UMGC moved to the 7th Edition of the APA Style. The links to the 7th Edition of the APA Style methodology are posted in Content – Course Resources – Writing Resources.
Spelling, punctuation, and grammar:
There should not be errors in grammar and punctuation. All sentences must be complete and well-structured.
Submission and Format:
The completed paper is to be submitted to the “Assignment” folder designated for the assignment. The paper must be in Word format otherwise no credit is earned for the assignment.
Written projects must be:
typed, double-spaced, in 12-point Times New Roman or Arial font, with margins no wider than one inch
have footnotes or endnotes, with correct citations
have a bibliography of sources used
include, for each entry, the author, title, city and state of publisher, publisher's name, year, and page numbers
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