Abbott Case Study
Company Analysis –Abbott Laboratories
By
Anupam Paul
ACCT 6330
FINANCIAL STATEMENT ANALYSIS
SPRING 2009
GRADUATE SCHOOL OF MANAGEMENT
UNIVERSITY OF DALLAS
Executive Summary
This paper provides overview of Abbott Laboratories, a research-based, global pharmaceutical company that discovers, develops, manufactures and markets leading prescription medicines as well as many of the world 's best-known consumer healthcare products. The paper discusses the company 's position in the industry, and the extent of it 's global operations. It also analyzes the company 's stock, with a risk and return and valuation analysis. This study begins with a review of the environment and economy in which the firm is operating and then examines its financial statements and key financial ratios. Ratios examined for the latest period and evaluated over six accounting periods and industry, sector and market trends. In 2007, Abbott reported sales and income from ongoing operations of $25.9 billion and $4.4 billion, respectively. In addition, 2007 marked the 35th straight year Abbott’s dividends have increased. Abbott’s solid and better than industry performance is backed by its strong broad based products and geographic diversity. The ratio analysis found that the Abbott has strength in utilizing it financial leverage to increase it operating profit and return on assets and equity, but it need to improve its liquidity and credit policy from suppliers. Some of the ratios show that company profitability or asset utilization has decreased at Abbott from 2004 to 2006; however, this is most likely a short-term effect of the company 's strategic reorganization to target its core business sectors and of the purchases and acquisitions that have not yet had the time to show their profitability. In our opinion, it is not something to be concerned about, since the current ratio figure in 2006 is still around the value of 1, showing that the company currently has no
By
Anupam Paul
ACCT 6330
FINANCIAL STATEMENT ANALYSIS
SPRING 2009
GRADUATE SCHOOL OF MANAGEMENT
UNIVERSITY OF DALLAS
Executive Summary
This paper provides overview of Abbott Laboratories, a research-based, global pharmaceutical company that discovers, develops, manufactures and markets leading prescription medicines as well as many of the world 's best-known consumer healthcare products. The paper discusses the company 's position in the industry, and the extent of it 's global operations. It also analyzes the company 's stock, with a risk and return and valuation analysis. This study begins with a review of the environment and economy in which the firm is operating and then examines its financial statements and key financial ratios. Ratios examined for the latest period and evaluated over six accounting periods and industry, sector and market trends. In 2007, Abbott reported sales and income from ongoing operations of $25.9 billion and $4.4 billion, respectively. In addition, 2007 marked the 35th straight year Abbott’s dividends have increased. Abbott’s solid and better than industry performance is backed by its strong broad based products and geographic diversity. The ratio analysis found that the Abbott has strength in utilizing it financial leverage to increase it operating profit and return on assets and equity, but it need to improve its liquidity and credit policy from suppliers. Some of the ratios show that company profitability or asset utilization has decreased at Abbott from 2004 to 2006; however, this is most likely a short-term effect of the company 's strategic reorganization to target its core business sectors and of the purchases and acquisitions that have not yet had the time to show their profitability. In our opinion, it is not something to be concerned about, since the current ratio figure in 2006 is still around the value of 1, showing that the company currently has no
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