Below are the provided instructions for this project:No more than 20% of the text of the project should be made up of quotes.

 

 

Accounting Analysis

Introduction

Accounting analysis refers to the situation in which accountants participate in assessing the viability, stability, and profitability of the project, company, or business. This situation entails preparing reports about the company's performance when obtaining the information on its financial reports. For example, a business performance report might be prepared to obtain financial information from its financial statements. Accountants are required to apply the accounting ratios when preparing the accounting analysis of the business. For example, accountants may apply the return on assets ratio to determine the business's efficiency in utilizing the available assets to make a profit. This paper will prepare the accounting analysis of PFIZER, comparing its financial performance between the 2020 and 2019 fiscal years ending 31st December, and determine the accounting analysis's strengths and weaknesses. Additionally, the paper will address the summary of the accounting analysis concerning the company's findings.

Presentation of Accounting Analysis

Table 1 Profitability ratio of PFIZER, Resource:( Consolidated Statements of Cash Flows Pfizer Inc)

Gross Profit Margin  gross profit margin =gross profit total sale x 100 2019 = 5623 6139=91.59 % 2020 5650 6224 =90.78 % The gross profit ratio represents the company's ability to converts its sales to profits when operating expenses are not deducted. The ratio of 2019 is better than that of 2020.

Net Profit Margin  net profit margin =net profit sale X 100 2019 33986139 = 55.35 % 2020 20126219 =32.35 % % The net profit ratio represents a company's ability to converts its sales to profit when the operating expenses are deducted. The ratio of 2019 is better than that of 2020. This is because the higher the ratio, the more a company converts its sales to profit.

Return on Assets return on assets =net incomeaverage assets X 100 2019 Average Assets=starting assets+ending assets2 167 594+159 5882 =163 591 ROA= 3 398 163 591 = 2.077 % 2020 Average Assets =167 594+154 229 2 = 160 911.5 ROA2 012160 911.5 =1.25 % ROA represents the ability of the company to generate profit when related to the assets invested. The ratio of 2019 is identified to be better compared to that of 2020.

Return on Equity  return on equity=net income average equity 2019 Average Equity=starting equity+ending equity 2 = 63 447+63 7582 =63 602.5 R0E=3 39863 602.5 =5.343 % 2020 Average Equity  63 473 +63 4472 = 63 460 ROE= 2012 63 460 =3.171 % ROE is used to indicate the profitability of the company concerning the owners’ equity. This gives investors an overview of the attractiveness of the investment. From the calculation, PFIZER in 2019 attracted more investors than in 2020.

Table 2. The Liquidity ratios of PFIZER. Resource:( Consolidated Statements of Cash Flows Pfizer Inc)

Current Ratio Current Ratio (CA)=current assets  current liabilities 2019 CA= 32803 37 304= 0.8793 2020 CA=35 067  25 920=1.3529 The current ratio is used to measure the ability of the company to meet its short-term obligation. It is evident that in 2019 the company had a higher capacity to meet its short-term debt than in 2020.

Cash Ratio  cash ratio  =cash+cash equivalent current liabilities 2019 Cash+ Cash Equivalent = 8 525 cash ratio=8 52537 304 =0.2285  2020 Cash+ Cash Equivalent = 10 437 cash ratio=10 437 25 920=0.4027  The cash ratio is used to measure the business's capacity to meet its short-term obligation using the cash and cash equivalent. The company has a better cash ratio in 2020 than in 2019.

Quick Ratio  quick  ratio  =current assets-inventory  current liabilities 2019 Current Assets -Inventory = 32 820 – 7 068 = 25752 quick  ratio  =25 752  37 304=0.6903 2020 Current Assets -Inventory = 35 067 – 8 046 = 27 021 quick  ratio  =27 021 25 920=1.042 The quick ratio is used to measure the company's capability to pay its short-term debts using the current assets that are convertible to cash, eliminating the inventory. From the calculation, the company has a higher capacity to meet its short-term obligation in 2020 than in 2019.

Table 3. The efficiency Ratios of PFIZER. Resource:( Consolidated Statements of Cash Flows Pfizer Inc)

Accounts Receivable Turnover Debtor turnover =net credit sales  average debtors 2019 Average Debtors=starting receivables+ending receivables2 8 025+8 7242 = 8 374.5 Net Credit Sales= Sales on Credit -Sales Return -Sales Allowances = 8 724 Debtor Turnover=8 7248 374.5 =1.417 times 2020  Average Debtors=starting receivables+ending receivables2 7 930+6 7722 = 7 351 Net Credit Sales= Sales on Credit -Sales Return -Sales Allowances = 7 930 Debtor Turnover=7 930 7 351=1.078 times The accounts receivable turnover is used to determine the business's capacity to collect its debts from debtors. In 2019 the company had a higher account receivable turnover than in 2020. This indicates that the company collected debts from debtors faster in 2019 than in 2020.

Inventory Turnover Ratio investory turnover=cost of salesaverage inventory 2019 Average Inventory =starting inventory+closing inventory 2= 8 283+7 508 2=7 895.5 Cost of Sales = Starting Inventory + Purchases – Closing Inventory  = 516  Inventory Turnover=5167 895.5 = 0.065 2020 Average Inventory =starting inventory+closing inventory 2= 8 046+7 068 2=7 557 Cost of Sales = Starting Inventory + Purchases – Closing Inventory  = 574 Inventory Turnover=5747557 = 0.076 The inventory turnover ratio is used to determine how many times the company sells and replaces its inventory. From the calculation, the company sold and replaced its stock faster in 2020 than in 2019.

Accounts Payable Turnover creditors turnover  =cost of sales average creditors 2019 Cost of Sale = 516 Average Creditors =starting account payable+closing account payable 2= 4 220 +4 6742= 4 447 account payable turnover516 4 447=0. 116 2020 Cost of Sale = 574 Average Creditors =starting account payable+closing account payable 2= 3 887+4 3092= 4098 accountpayable turnover5744 098= 0.14 The accounts payable turnover ratio is used to determine the rate at which the pays off its creditors.  From the calculation, it is identified that the company its suppliers earlier in 2020 than in 2019.

Table 4. Leverage Ratios of PFIZER (Resource:(Consolidated Statements of Cash Flows Pfizer Inc)

Debt Ratio debt ratio =total liabilities  total assets 2019  Debt ratio= 104 148167 594= 0.6214 2020 Debt Ratio Debt ratio=  90 756154 229=0.5884 The debt ratio indicates the number of assets in the company that is financed by debt. From that calculation, the company is identified to have financed its assets with debt in 2019 more than in 2020.

Debt to Equity Ratio debt to equity ratio  =total liabities shareholder equity 2019  Debt to equity= 104 148 63 447= 1.6414 2020 Debt Ratio Debt to equity ratio=  90 75663 238=1.435 The debt-to-equity ratio is used to indicate the capital structure of the company. It is identified that the company finances its operations with debt more in 2019 than in 2020.

Capitalization Ratio capitalization  ratio  =longterm liabilitieslongterm  liabilities+shareholders equity 2019 Long-Term Liabilities+ Shareholders Equity= 66 844+ 63 447= 130 291 capitalization ratio=66 844130 291=0.5130 2020  Long-Term Liabilities+ Shareholders Equity= 64 836+ 63 473= 128 309 capitalization ratio=64 836128 309=0.5053 The capitalization ratio is applied to depict the extent to which the company uses its equity.  The calculations indicate that the company is healthy since it involves a capitalization ratio that does not exceed 0.5, which is considered ideal.

Strength and weaknesses of the analysis

The accounting analysis using ratio is better since it gives an overview of the company's performance when simple calculations are made. For example, when determining the company accountant's current ratio, it is required to identify the current assets and current liabilities from the income statement. Additionally, the ratio analysis helps to identify the problem in the company efficiently. This captures the attention of the management to address it effectively.

Despite being advantageous, the accounting analysis using ratio has the weakness of applying historical information, making it hard to determine the organization's future (Corporate Finance Institute, 2020). Another weakness is the prices of elements being included in the financial reports being affected by inflation, making it hard to assess the company’s performance.

Summary of The Analysis and The Findings

Table 1 represents the profitability ratio of PFIZER. From the table, it is clear the company profit is decreasing. For example, the net profit margin indicates that in 2019, the company made more profit after deducting operation costs than in 2020. Table 2 represents the liquidity ratios of PFIZER. The liquidity ratios are used to determine the riskiness of the company involved. For example, from the table, the ratios are identified to be increased. This indicates that PFIZER is becoming less riskier to investors due to its capacity to repay debts improving.

Table 3 represents the efficiency ratios of the PFIZER. The efficiency ratios are used to measure how the company uses its resources and assets. For example, the account receivable ratio represents how many times a company collects its average account receivables. The table shows that the ratios are decreasing, indicating that the company’s efficiency in using its resource is declining. Table 4 represents the leverage ratios of PFIZER. The leverage ratios are used to show how the company is financing its operations. For example, from the table, it is identified that the company employed more debts to finance its operation. Additionally, the company applied more debt in 2019 than in 2020. This indicates that the company enjoyed more tax shields in 2019 than in 2020.

References

Corporate Finance Institute. (2018). Financial Ratios eBook. Corporate Finance Institute. https://corporatefinanceinstitute.com/assets/CFI-Financial-Ratios-Cheat-Sheet-eBook.pdf

Corporate Finance Institute. (2020, February 3). Limitations of Ratio Analysis - Ratios are Popular, Learn About the Problems. Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/knowledge/finance/limitations-ratio-analysis/. 

Pfizer Inc. and Subsidiary Companies. (2020). 2019 Financial Report. Pfizer Inc. and Subsidiary Companies. https://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_PFE_2019.pdf. 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION. (2021). s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. https://s21.q4cdn.com/317678438/files/doc_financials/2020/ar/PFE-2020-Form-10K-FINAL.pdf.

 

Below are the provided instructions for this project:No more than 20% of the text of the project should be made up of quotes.

These instructions have been condensed due to length and clarity.

For this assignment, use the company PFIZER

Phased Company Analysis Project:

The final project assignment requires application of a three-part framework of organizational evaluation that includes strategic, accounting, credit and financial analyses.  The assignment involves the application of this analytical framework to an existing, publicly-owned company.  This final project is designed to facilitate the synthesis of the topics examined in this course into a comprehensive and applied analysis and evaluation of a company. 


Part 1 Accounting Analysis (Week 3):

Assuming the role of an entering corporate officer, complete an accounting analysis based on the Week 1 and Week 2 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.

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 Accounting Analysis – The student should develop and present the basic accounting analysis for the company.  

It is necessary to prepare and incorporate a table (tables are always numbered, titled, and show the source of the information) of the relevant criteria being examined in the accounting analysis and their present status.  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 accounting 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 accounting 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.