Abbott Labs Financial Analysis
Balance Sheet
The biggest change in Abbott’s balance sheet can be seen in the composition of its asset accounts. In 2006, % of the firm’s assets were current, while 69% were of the long-term variety. In 2010, however, the portion of current assets increased by 7%. This increase in current assets is most visible in cash and short-term investments (4% in 2006 to 9% in 2010) and corresponds with a higher level of uncertainty in today’s economy. The fact that Abbott Laboratories has chosen to increase the value of liquid assets on its balance sheet indicates low returns on long-term investments and a preference of keeping cash on hand rather than reinvesting in the business.
The liabilities section of Abbott’s balance sheet does not show much change from 2006 to 2010. The biggest change is a decrease in short term debt, which indicates that the firm is not taking on any additional short-term debt as it pays of its existing notes. An increase in long term debt, however, implies that the firm may be favoring longer-term debt over short-term notes. One reason for this might be a lower risk inherent in longer-term debt, which can also impair the firm’s return. Other liabilities also increased from 2006 to 2010, but detail is not provided as to the composition of this balance sheet account.
Abbott’s shareholders equity has remained rather constant from 2006 to 2010. Slight increases in common stock and retained earnings are offset by a decrease in treasury stock, resulting in a 1% net increase in equity during this time period.
Income Statement
A review of Abbott’s income statements for 2006 and 2010 shows a significant improvement in net income as a percentage of revenues. The firm was able to reduce its cost of sales by 2% during the time period, but this savings was offset by 1% increases in both SG&A and R&D expenses. The biggest contributing factor to Abbott’s bottom line improvement comes from the reduction of unusual expenses. This expense
The biggest change in Abbott’s balance sheet can be seen in the composition of its asset accounts. In 2006, % of the firm’s assets were current, while 69% were of the long-term variety. In 2010, however, the portion of current assets increased by 7%. This increase in current assets is most visible in cash and short-term investments (4% in 2006 to 9% in 2010) and corresponds with a higher level of uncertainty in today’s economy. The fact that Abbott Laboratories has chosen to increase the value of liquid assets on its balance sheet indicates low returns on long-term investments and a preference of keeping cash on hand rather than reinvesting in the business.
The liabilities section of Abbott’s balance sheet does not show much change from 2006 to 2010. The biggest change is a decrease in short term debt, which indicates that the firm is not taking on any additional short-term debt as it pays of its existing notes. An increase in long term debt, however, implies that the firm may be favoring longer-term debt over short-term notes. One reason for this might be a lower risk inherent in longer-term debt, which can also impair the firm’s return. Other liabilities also increased from 2006 to 2010, but detail is not provided as to the composition of this balance sheet account.
Abbott’s shareholders equity has remained rather constant from 2006 to 2010. Slight increases in common stock and retained earnings are offset by a decrease in treasury stock, resulting in a 1% net increase in equity during this time period.
Income Statement
A review of Abbott’s income statements for 2006 and 2010 shows a significant improvement in net income as a percentage of revenues. The firm was able to reduce its cost of sales by 2% during the time period, but this savings was offset by 1% increases in both SG&A and R&D expenses. The biggest contributing factor to Abbott’s bottom line improvement comes from the reduction of unusual expenses. This expense