ABOUT ABBOTT LABORATORIES

BRIEF HISTORY:
Abbott is a global company with a straightforward purpose: we help people live
more fully with life-changing health technologies and products. Our nutrition
products build and maintain health at every stage of life. Our diagnostic solutions
provide the information to guide effective treatment decisions. Our branded
generic medicines help people get and stay healthy. And our medical devices use
the most advanced technologies to keep hearts and arteries healthy, to treat
chronic pain and movement disorders, and to give people with diabetes more
freedom and less pain. With leadership positions in every market we serve, Abbott
is prepared for continued above-market growth and consistently strong
shareholder returns.
When people are at their healthiest, they have the potential to live not just
longer, but better. This simple truth has been Abbott’s guiding principle for more
than 130 years. From the start, we’ve worked to create more possibilities, for
more people, through the power of health. It’s an ideal that’s summed up in the
four words that define our purpose: LIFE. TO THE FULLEST.
TRUSTED BRANDS:
 Pediasure
 Pedialyte
 Similac
 Klaricid
 Ensure
 Glucerna
 Brufen
 Freestyle

1
BUSINESS AREAS:
Diabetes Care:
Helping people with diabetes enjoy healthier, active lives.
Diagnostic:
Bringing accurate timely information to better manage your
health.
Nutrition:
Nourishing your body at every stage of life.
Pharmaceuticals:
Helping people get and stay healthy with quality medicine you
can trust.

In our report we enlighten the pharmaceutical business area of Abbott Laboratories

Pvt. Ltd. And compare it with other similar competitor industries enlisted below.

Major Firm:
Abbott Laboratories Pvt. Ltd.
Competitor Firms:
Novartis Pharmaceuticals
GlaxoSmithKline Pvt. Ltd

2
 Abbott Financial Analysis
Common Size Analysis (Balance Sheet)

FOR THE YEAR ENDED DECEMBER 31, 2017, 2018 and 2019
2017 2018 2019
AMOUNT (Rs) PERCENT (%) AMOUNT (Rs) PERCENT (%) AMOUNT (Rs) PERCENT (%)
Non Current Assets
Property, plant and equipment 5,419,054 28% 7,191,606 35% 8,016,405 38%
Intangible assets 10,650 0.1% 24,879 0.12% 18,787 0.09%
Long term loans 50,988 0.3% 55,009 0.27% 53,608 0.25%
Long term security deposits 7,513 0.04% 7,513 0.04% 7,513 0.04%
Long term pre-payments 4,117 0.02% 4,119 0.02% 4,731 0.02%
Total Non Current Assets 5,492,322 29% 7,283,126 36% 8,101,044 38%

Current Assets
Stores and spares 129,521 1% 178,815 1% 239,591 1%
Stock in trade / Inventory 3,475,745 18% 4,428,893 22% 7,722,228 36%
Trade debts / Account Receivable 914,972 5% 1,143,015 6% 869,110 4%
Loans and advances 159,591 1% 147,183 1% 293,792 1%
Trade deposits and short term prepayments 252,905 1% 620,876 3% 616,061 3%
Interest accrued 12,495 0% 7,857 0.04% 1,541 0.01%
Other receivables 174,448 1% 383,054 2% 555,114 3%
Taxation 4,390 0% 410,302 2% 888,969 4%
Cash and bank balances 8,571,721 45% 5,678,136 28% 1,926,902 9%
Total Current Assets 13,695,788 71% 12,998,131 64% 13,113,308 62%
TOTAL ASSETS 19,188,110 100% 20,281,257 100% 21,214,352 100%

3
SHARE CAPITAL AND RESERVES
Authorised capital 2,000,000 10% 2,000,000 10% 2,000,000 9%
Issued, subscribed and paid up capital 979,003 5% 979,003 5% 979,003 5%
Reserves Capital 459,761 2% 533,783 3% 620,402 3%
Revenue 12,917,071 67% 11,722,225 58% 11,520,402 54%
Total Equity 14,355,835 75% 13,235,011 65% 13,119,807 62%

NON CURRENT LIABILITIES

Deferred taxation 231,147 1% 255,405 1% 242,028 1%
Liability against assets 173,719 1% 312,833 1%
Total Non Current Liabilities 231,147 1% 429,124 2% 554,861 3%

CURRENT LIABILITIES
Trade and other payables 4,568,002 24% 6,510,381 32% 7,401,421 35%
Unclaimed dividends 33,126 0.2% 66,208 0.3% 50,542 0.2%
Current maturity of leased liabilities 40,533 0.2% 87,721 0.4%
Total Current Liabilities 4,601,128 24% 6,576,589 32% 7,539,684 36%
Total Liabilities 4,832,275 25% 7,005,713 35% 8,094,545 38%
TOTAL LIABILITIES AND EQUITY 19,188,110 100% 20,240,724 100% 21,214,352 100%

4
 FOR THE YEAR ENDED DECEMBER 31, 2017, 2018 and 2019
2017 2018 2019
AMOUNT (Rs) PERCENT (%) AMOUNT (Rs) PERCENT (%) AMOUNT (Rs) PERCENT (%)
Sales 26,088,233 100% 29,719,279 100% 22,280,353 100%
Cost of goods sold 15,999,247 61% 19,944,014 67% 15,964,549 72%
Gross profit 10,088,986 39% 9,775,265 33% 6,315,804 28%
Selling and distribution expenses 3,611,882 14% 4,525,458 15% 3,927,475 18%
Administrative expenses 468,172 2% 562,771 2% 477,102 2%
Other expenses 602,244 2% 786,315 3% 449,978 2%
Other income 445,317 2% 458,654 2% 247,821 1%
Profit before interest and taxation 5,852,005 22% 4,359,375 15% 1,709,070 8%
Finance Costs 10,060 0% 15,606 0% 34,801 0%
Profit before taxation 5,841,945 22% 4,343,769 15% 1,674,269 8%
Taxation 1,636,713 6% 1,649,436 6% 902,032 4%
Profit after tax 4,205,232 16% 2,694,333 9% 772,237 3%
5
Common size analysis:
 Property, Plant and Equipment holds a major share of the increasing
percentage of non-current Asset whereas cash and bank balance hold a
major share of the decreasing percentage of current assets.
 The percentage of Non-Current Asset to total Assets have increased from
2017 to 2019 while the percentage of Current Asset to total Asset have
decreased from 2017 to 2019.
 The stock in trade are increasing over the year and receivables shows a
fluctuating trend with an increase in 2018 and decrease in 2019
 The liquidity is decreasing over the year because the highly liquid asset that
is cash is decreasing sharply that is from 45% to 9%.
 The percentage of current and Non-current liabilities to total liabilities are
increasing but the increase is still less than that of the percentage of current
asset to total asset which indicates that company is able to meet its current
liabilities with its current assets.
 The percentage of CGS to sales is increasing over the year and so the
percentage of Gross profit is decreasing over the year indicating that the
company is not able increase its sales accordingly.
 The percentage of expenses to sales are increasing slightly with the passing
year and with the increase in CGS the profit before income and tax is
decreasing sharply.

6
Index Analysis (Balance Sheet):

FOR THE YEAR ENDED DECEMBER 31, 2017, 2018 and 2019
2017 2018 2019
AMOUNT (Rs) PERCENT (%) AMOUNT (Rs) PERCENT (%) AMOUNT (Rs) PERCENT (%)
Non Current Assets
Property, plant and equipment 5,419,054 100% 7,191,606 133% 8,016,405 148%
Intangible assets 10,650 100% 24,879 234% 18,787 176%
Long term loans 50,988 100% 55,009 108% 53,608 105%
Long term security deposits 7,513 100% 7,513 100% 7,513 100%
Long term pre-payments 4,117 100% 4,119 100% 4,731 115%
Total Non Current Assets 5,492,322 100% 7,283,126 133% 8,101,044 147%

Current Assets
Stores and spares 129,521 100% 178,815 138% 239,591 185%
Stock in trade 3,475,745 100% 4,428,893 127% 7,722,228 222%
Trade debts 914,972 100% 1,143,015 125% 869,110 95%
Loans and advances 159,591 100% 147,183 92% 293,792 184%
Trade deposits and short term prepayments 252,905 100% 620,876 245% 616,061 244%
Interest accrued 12,495 100% 7,857 63% 1,541 12%
Other receivables 174,448 100% 383,054 220% 555,114 318%
Taxation 4,390 100% 410,302 9346% 888,969 20250%
Cash and bank balances 8,571,721 100% 5,678,136 66% 1,926,902 22%
Total Current Assets 13,695,788 100% 12,998,131 95% 13,113,308 96%
TOTAL ASSETS 19,188,110 100% 20,281,257 106% 21,214,352 111%

7
SHARE CAPITAL AND RESERVES
Authorised capital 2,000,000 100% 2,000,000 10% 2,000,000 9%
Issued, subscribed and paid up capital 979,003 100% 979,003 5% 979,003 5%
Reserves Capital 459,761 100% 533,783 3% 620,402 3%
Revenue 12,917,071 100% 11,722,225 59% 11,520,402 54%
Total Equity 14,355,835 100% 13,235,011 67% 13,119,807 62%

NON CURRENT LIABILITIES

Deferred taxation 231,147 100% 255,405 110% 242,028 105%
Liability against assets 173,719 312,833
Total Non Current Liabilities 231,147 100% 429,124 186% 554,861 240%

CURRENT LIABILITIES
Trade and other payables 4,568,002 100% 6,510,381 143% 7,401,421 162%
Unclaimed dividends 33,126 100% 66,208 200% 50,542 153%
Current maturity of leased liabilities 40,533 87,721
Total Current Liabilities 4,601,128 100% 6,617,122 144% 7,539,684 164%
Total Liabilities 4,832,275 100% 7,046,246 146% 8,094,545 168%
TOTAL LIABILITIES AND EQUITY 19,188,110 100% 19,852,133 103% 21,214,352 111%

8
 FOR THE YEAR ENDED DECEMBER 31, 2017, 2018 and 2019
2017 2018 2019
AMOUNT (Rs) PERCENT (%) AMOUNT (Rs) PERCENT (%) AMOUNT (Rs) PERCENT (%)
Sales 26,088,233 100% 29,719,279 114% 22,280,353 85%
Cost of goods sold 15,999,247 100% 19,944,014 125% 15,964,549 100%
Gross profit 10,088,986 100% 9,775,265 97% 6,315,804 63%
Selling and distribution expenses 3,611,882 100% 4,525,458 125% 3,927,475 109%
Administrative expenses 468,172 100% 562,771 120% 477,102 102%
Other expenses 602,244 100% 786,315 131% 449,978 75%
Other income 445,317 100% 458,654 103% 247,821 56%
Profit before interest and taxation 5,852,005 100% 4,359,375 74% 1,709,070 29%
Finance Costs 10,060 100% 15,606 155% 34,801 346%
Profit before taxation 5,841,945 100% 4,343,769 74% 1,674,269 29%
Taxation 1,636,713 100% 1,649,436 101% 902,032 55%
Profit after tax 4,205,232 100% 2,694,333 64% 772,237 18%
9
Index Analysis:
 Here Relative to base year the percentage of plant, property and equipment
is increasing whereas intangible assets are also increasing.
 The percentage of total Noncurrent assets is increasing relative to base year
whereas the percentage of current asset has decrease in 2018 but has
slightly increased in 2019.
 The percentage of receivables are greater than double in 2018 and further
decreased in 2019 indicating either the decrease in sales or increase in
receivable turnover.
 The percentage of stores and spares and stock in trade has also increased
than base year indication the accumulation of inventories.
 The cash and bank balances has decreased sharply relative to base year.
 The current and non-current liabilities both have increased greatly relative
to base year.
 The percentage of current asset is decreasing whereas the percentage of
current liabilities is increasing indicating that current asset is not enough to
meet the current liabilities.
 The percentage of total liabilities and total assets is increasing relative to
base year.
 The percentage of total equity has decreased but the current liabilities and
non-current liabilities has increased so the total liability and equity
percentage has increased slightly over the period of years.
 The sales relative to base year has increased in 2018 but then again
decreased in 2019 so the cost of goods sold has also increased in 2018 and
decreased in 2019.
 The percentage of all the other expenses have increased in 2018 and
decreased in 2019 but is still greater than base year whereas the financial
costs have increased in 2018 and 2019 greatly.
 The percentage of profit after and before tax have decreased sharply during
both the year compared to base year.

10
 Ratio’s
Liquidity Ratio

2019 2018 2017

Current Ratio 1.7 2.0 3.0

Acid-test Ratio 0.72 1.30 2.22

Leverage Ratio

2019 2018 2017

Debt-to-Equity 0.62 0.53 0.34

Debt-to-total-Asset 0.38 0.35 0.25

Coverage

2019 2018 2017

Interest Coverage 49.11 279.34 581.71

Activity Ratio

2019 2018 2017

Receivable Turnover 26 26 29

Receivable Turnover in days 14 14 13

Inventory Turnover 2 5 5

Inventory Turnover in days 177 81 79

Total Asset Turnover 1.05 1.47 1.36

Profitability Ratio

2019 2018 2017

Net Profit Margin 0.03 0.09 0.16

Return on Investment 0.04 0.13 0.22

Return on Equity 0.06 0.20 0.29

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 RATIO ANALYSIS
1. Liquidity Ratio:
Liquidity ratio determines the firm’s ability to meet its debts, ability to pay
its debt when they become due. These ratios establish relation between
cash and other current asset and current liabilities. Commonly used ratios
are:

 Current Ratio
 Quick Ratio

 Here Current Ratio and Acid Test Ratios are decreasing with every passing
year. Obviously as the ratio decreases so does the liquidity of the company.
 A company with a quick/current ratio of 1 indicates that current assets equal
current liabilities. Both these ratios are decreasing, and acid test ratio is even
less than 1. This shows that this company is unable to pay off its current
liabilities with current assets or without selling any long-term assets.
 A lower current ratio indicates less liquidity, implying a greater reliance on
operating cash flow and outside financing to meet short- term obligations.
Liquidity affects the company’s capacity to take on debt.
 Here Quick ratio also reflects the fact that inventory might not be easily and
quickly converted into cash, and furthermore, that a company would
probably not be able to sell all of its inventory for an amount equal to its
carrying value.

2. Leverage ratio:
Leverage ratios are used to determine the relative level of debt load that a
business has incurred. These ratios compare the total debt obligation to either
the assets or equity of a business.
The debt management ratio we can justify on three ratios, those are as
follows
 Debt to Total Asset Ratio
 Debt to Equity Ratio

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 Interest Coverage Ratio

Debt- to- Assets Ratio This ratio measures the percentage of total assets
financed with debt.
Debt- to- Equity Ratio This ratio measures the amount of debt capital
relative to equity capital. Higher debt means higher financial risk and thus
weaker solvency.
Here both the ratios are increasing which indicates decrease in solvency.
3. Activity Ratio:
Activity ratios are used to evaluate the efficiency, with which the company
manages to convert its assets into sales or cash. This ratio also called the
turnover ratios because they indicate the speed with which the assets are
transformed or turnover into sales. A proper balance between assets and
sales generally reflects on that the assets.

The asset management ratios are as following-

• Inventory Turnover Ratio
• Days in inventory
• Average Collection Period
• Fixed Asset Turnover Ratio
• Inventory turnover: Here the inventory turnover is decreasing. A
lower inventory turnover ratio implies a longer period that inventory
is held, and thus a higher number of days for inventory turnover.
Alternatively, a low inventory turnover ratio (and commensurately
high DOH) could possibly indicate the company is piling up on its stock
which could increase the holding cost.
• Receivable turnover: Decreasing receivables turnover ratio might
indicate that the company is unable to materialize cash from its sales
hence it increases the no. of days of receivable turnover

13
 • Total asset turnover ratio A decreasing ratio indicates lower
efficiency. The ratio also reflects the need of strategic decisions by
management
4. Profitability Ratio:
Profitability ratio represents the organization’s ability to translate sales into
profit at different stages of measurement. The ratios measure profitability
after consideration of all revenues and expenses, including interest taxes and
non-operating items. These ratios specify the capacity of the company to
survive difficult circumstances, which might occur from a number of basis,
such as declining price, increasing cost and declining sale.

• The profitability ratios are as follows

• Net Profit Margin
• Return on Asset (ROA) Ratio
• Return on Equity (ROE) Ratio
• Return- on- sales: express various subtotals on the income statement
(e.g., gross profit, operating profit, net profit) as a percentage of
revenue.
• ROA measures the return earned by a company on its assets. The
higher the ratio, the more income is generated by a given level of
assets. Here the return is decreasing indicating lower income
generated by the given assets.
• ROE A variation of ROE is return on common equity, which measures
the return earned by a company only on its common equity.
• Net profit margin followed the same pattern as ROE and ROA that is
decreasing from 2017 2019. This is related to the fact that Total Assets,
equity and EBIT and profit after tax all are decreasing from 2017 to
2019.

14
 Novartis Financial Analysis
Common Size Analysis (Balance Sheet)

Novartis Group
Balance Sheet
(For the Years ended December 31, 2019, 2018 and 2017)
Regular (USD millions) Common size
2019 2018 2017 2019 2018 2017
Cash, cash equivalents, and
marketable securities and derivative
financial instruments 11,446 15,964 9,485 10% 11% 7%
Inventories 5,982 6,956 6,867 5% 5% 5%
Recievables 8,301 8,727 8,600 36% 36% 47%
Other current assets 2,934 3,109 3,256 2% 2% 2%

Total current assets 28,663 34,756 28,208 24% 24% 21%

Non-current assets 88,866 110,000 104,871 75% 76% 79%
Total assets 118,370 145,563 133,079 100% 100% 100%

Trade accounts payable 5,424 5,556 5,169 5% 4% 4%

Other current liabilities 22,809 24,000 18,234 19% 16% 14%
Total current liabilities 28,233 29,556 23,403 24% 20% 18%
Non-current liabilities 34,555 37,264 35,449 29% 26% 27%
Total liabilities 62,819 66,871 58,852 53% 46% 44%
Total equity* 55,551 78,692 74,227 47% 54% 56%
Total liabilities and equity 118,370 145,563 133,079 100% 100% 100%

15
Common Size Analysis (Income statement)

Novartis Group
Income Statement
(For the years ended December 31, 2019, 2018 and 2017)
Regular (USD millions) Common size
2019 2018 2017 2019 2018 2017

Net sales 48,677 46,099 43,404 100% 100% 100%

Cost of goods sold 14,425 14,510 13,633 30% 31% 31%

Gross profit 34,252 31,589 29,771 70% 69% 69%

Selling, general and

administration 14,369 13,717 12,465 30% 30% 29%
Other expense 12,828 11,098 10,526 26% 24% 24%
Other income 2,690 8,067 3,030 6% 17% 7%

Income before interest and

taxation 9,745 14,841 9,810 20% 32% 23%
Interest expense 850 932 750 2% 2% 2%
Other financial income 45 186 42 0% 0% 0%
Income before taxes 8,940 14,095 9,102 18% 31% 21%
Taxes 1,793 1,295 1,603 4% 3% 4%
Net income 7,147 12,800 7,499 15% 28% 17%

16
Common size analysis:
• Here the percentage of cash and cash equivalent when compared to total
assets has increased slightly then decreased.
• Inventories has stayed constant whereas the receivable has decreased and
then became constant.
• The percentage of Other current assets has remained constant whereas the
non-current asset has decreased but the percentage of total current asset
compared to total asset has increased and then remained constant.
• Accounts payable and other current liabilities has increased over the period
of two years and so has the total current liabilities when compared to total
liabilities and equity.
• Noncurrent liabilities have decreased in 2018 and then increased in 2019.
• Also, the percentage of equity has also decreased in 2018 and increased in
2019 compared to total liabilities and equity.

17
Index Analysis (Balance Sheet)

Novartis Group
Balance Sheet
(For the Years ended December 31, 2019, 2018 and 2017)
Regular (USD millions) Index
2017 2018 2019 2017 2018 2019
Cash, cash equivalents, and marketable
securities and derivative financial
instruments 9,485 15,964 11,446 100% 168% 121%
Inventories 6,867 6,956 5,982 100% 101% 87%
Recievables 8,600 8,727 8,301 100% 101% 97%

Other current assets 3,256 3,109 2,934 100% 95% 90%

Total current assets 28,208 34,756 28,663 100% 123% 102%

Non-current assets 104,871 110,000 88,866 100% 105% 85%
Total assets 133,079 145,563 118,370 100% 109% 89%

Trade accounts payable 5,169 5,556 5,424 100% 107% 105%

Other current liabilities 18,234 24,000 22,809 100% 132% 125%
Total current liabilities 23,403 29,556 28,233 100% 126% 121%
Non-current liabilities 35,449 37,264 34,555 100% 105% 97%
Total liabilities 58,852 66,871 62,819 100% 114% 107%
Total equity* 74,227 78,692 55,551 100% 106% 75%
Total liabilities and equity 133,079 145,563 118,370 100% 109% 89%

18
Index Analysis (Income statement)

Novartis Group
Income Statement
(For the years ended December 31, 2019, 2018 and 2017)
Regular (USD millions) Common size
2019 2018 2017 2019 2018 2017

Net sales 48,677 46,099 43,404 100% 100% 100%

Cost of goods sold 14,425 14,510 13,633 30% 31% 31%

Gross profit 34,252 31,589 29,771 70% 69% 69%

Selling, general and

administration 14,369 13,717 12,465 30% 30% 29%
Other expense 12,828 11,098 10,526 26% 24% 24%
Other income 2,690 8,067 3,030 6% 17% 7%

Income before interest and

taxation 9,745 14,841 9,810 20% 32% 23%
Interest expense 850 932 750 2% 2% 2%
Other financial income 45 186 42 0% 0% 0%
Income before taxes 8,940 14,095 9,102 18% 31% 21%
Taxes 1,793 1,295 1,603 4% 3% 4%
Net income 7,147 12,800 7,499 15% 28% 17%

19
Index analysis:
• The percentage of cash and cash equivalents relative to base year are
increasing
• The percentage of inventories and receivables has increased a little in 2018
and then decreased sharply in 2019 whereas the other the current assets
have decreased over the period of 2 year compared to base year.
• As a result of this the percentage of total current, non-current and total
assets have increased in 2018 and then decreased in 2019.
• Accounts payable, total current and non-current liabilities have increased in
2018 and then decreased in 2019 and as a result of this total liabilities have
also increased in 2018 but decreased in 2019.
• Same trend is followed by equity percentage which has increased from base
year in 2018 and then decreased in 2019.
• Percentage of Sales has increased over the period of 2 year compared to base
year and so has cost of goods sold but it has remained constant after 2018.
This has resulted in increased gross profit in both the years.
• Percentage of Selling administrative and other expenses has increased over
the 2 years compared to base year whereas interest expense has increased
in 2018 but has decreased in 2019.
• The percentage of other financial income has increased approximately 4
times in 2018 but decreased sharply in 2019 and so the income before taxes
and net income has increased in 2018 and then decreased in 2019 compared
to base year.

20
 Ratio’s
Liquidity Ratio

2019 2018 2017

Current Ratio 1.01 1.17 1.20

Acid-test Ratio 0.80 0.94 0.91

Leverage Ratio

2019 2018 2017

Debt-to-Equity 1.13 0.84 0.79

Debt-to-total-Asset 0.53 0.45 0.44

Coverage Ratio

2019 2018 2017

Interest Coverage 11.46 15.92 13.08

Activity Ratio

2019 2018 2017

Receivable Turnover 5.86 5.28 5.04

Receivable Turnover in days 62.24 69.09 72.32

Inventory Turnover 2.41 2.08 1.98

Inventory Turnover in days 151.36 174.97 183.85

Total Asset Turnover 0.41 0.31 0.32

Profitability Ratio

2019 2018 2017

Net Profit Margin 15% 28% 17%

Return on Investment 6% 9% 6%

Return on Equity 13% 16% 10%

21
 RATIO ANALYSIS
• Here Quick ratio also reflects the fact that inventory might not be easily
and quickly converted into cash, and furthermore, that a company would
probably not be able to sell all of its inventory for an amount equal to its
carrying value
• Higher debt means higher financial risk and thus weaker solvency. Here
both the ratios are increasing which indicates decrease in solvency. By
2019 53% of company's total assets are financed with debt whereas the
debt to equity ratio of around 1.1 in 2019 indicates the total debt and
equity are of same value.
• Here the inventory turnover is increasing. A higher inventory turnover
ratio implies a shorter period that inventory is held, and thus a lower
number of days for inventory turnover.
• Alternatively, a high inventory turnover ratio (and commensurately low
DOH) could possibly indicate the company does not carry adequate
inventory, so shortages could potentially hurt revenue.
• Here there is high receivables turnover ratio (and commensurately low
DSO) that might indicate highly efficient credit and collection.
Alternatively, a high receivables turnover ratio could indicate that the
company’s credit or collection policies are too stringent, suggesting the
possibility of sales being lost to competitors offering more lenient terms.
• The higher total asset turnover ratio means the company has the overall
ability to generate revenues with a given level of assets. A higher ratio
indicates greater efficiency.
• The higher the ROA ratio, the more income is generated by a given level
of assets. ROE measures the return earned by a company on its equity
capital, including minority equity, preferred equity, and common equity.
• Here Net profit margin followed the same pattern as ROE and ROA that is
increasing from 2017 to 2018 and then decreasing from 2018 to 2019.
This is related to the fact that Total Assets, equity and EBIT and profit after
tax all are increasing from 2017 to 2018 and decreasing from 2018 to
2019.

22
 COMPARATIVE ANALYSIS OF BOTH COMPANIES
• Both companies show a similar decreasing trend in liquidity ratio and
leverage ratio.
• As indicated by the liquidity ratios, although Novartis and Abbott are
unable to meet its current liabilities with its most liquid assets, it still can
cover that up by selling inventories.
• Novartis has an increasing trend in activity ratio indicating that the firm is
efficiently utilizing its assets, able to sell inventory and frequently
converting its receivables into cash. Whereas Abbott is unable to utilize
its assets efficiently which is resulting in an overall decrease in its activity
ratio.
• Profitability ratio reflects that Novartis is able to maintain an increase in
the gross profit even after increasing COGS while in case of Abbott, there
is a constant decrease in the gross profit and overall profitability. This may
have resulted from increased sale of Novartis as compared to Abbott for
which the sales kept on decreasing.
• Overall, Novartis presents a better financial position as compared to that
of Abbott which reflects a deteriorating condition.

23
 INDUSTRIAL TREND ANALYSIS
Liquidity Ratio:
Liquidity Ratio
2019 2018 2017 Industry Average
Current Ratio 1.7 2.0 3.0 3.06
Acid-test Ratio 0.72 1.30 2.22 2.23

Liquidity Ratio
4.0
3.0 3.06
3.0 2.22 2.23
1.7 2.0
2.0 1.30
0.72
1.0
0.0
2019 2018 2017 Industry Average

Current Ratio Acid-test Ratio

Leverage Ratio:
Leverage Ratio
2019 2018 2017 Industry Average
Debt-to-Equity 0.62 0.53 0.34 0.24
Debt-to-total-Asset 0.38 0.35 0.25 0.26

Leverage Ratio
0.80

0.60

0.40

0.20

0.00
2019 2018 2017 Industry Average

Debt-to-Equity Debt-to-total-Asset

24
Coverage Ratio:
Coverage
2019 2018 2017 Industry Average
Interest Coverage 49.11 279.34 581.71 32.23

800.00 Coverage Ratio

581.71
600.00

400.00 279.34
200.00
49.11 32.23
0.00
2019 2018 2017 Industry Average
2019 2018 2017 Industry Average

Profitability Ratio:
Profitability Ratio
2019 2018 2017 Industry Average
Net Profit Margin 0.03 0.09 0.16 0.55
Return on Investment 0.04 0.13 0.22 0.23
Return on Equity 0.06 0.20 0.29 1.76

Net Profit Margin Return on Return on Equity

0.60 0.55 Investment 2.00 1.76
0.50 0.22 0.23
0.25 1.50
0.40
0.20 0.13
0.30 1.00
0.16 0.15
0.20 0.09
0.03
0.10 0.04 0.50 0.20 0.29
0.10 0.05 0.06
0.00 0.00 0.00

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Activity Ratio:
Activity Ratio
2019 2018 2017 Industry Average
Receivable Turnover 26 26 29 19.24
Receivable Turnover in days 14 14 13 67.89
Inventory Turnover 2 5 5 7.06
Inventory Turnover in days 177 81 79 180.74
Total Asset Turnover 1.05 1.47 1.36 1.55

Total Asset Turnover

2.00
1.47 1.55
1.50
1.36
1.05
1.00

0.50

0.00
2019 2018 2017 Industry Average

Recieveables Ratio
80 67.89
60
40 26 26 29
14 14 13 19.24
20
0
2019 2018 2017 Industry Average

Recievable Turnover Recievable Turnover in days

Inventory Ratios
200 177 180.74
150
100
81 79
50 2 5 5 7.06
0
2019 2018 2017 Industry Average

Inventory Turnover Inventory Turnover in days

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 Activity Ratio's
200
180
160
140
120
100
80
60
40
20
0
2019 2018 2017 Industry Average

Recievable Turnover Recievable Turnover in days Inventory Turnover

Inventory Turnover in days Total Asset Turnover

INDUSTRIAL TREND
• Liquidity decreased over the years. It was average in 2017 and below average
in the subsequent years. This may have resulted from an increase in current
liabilities.
• The leverage ratio is above industry average and shows an increasing trend
over the years due to increase in debt financing
• Although the company is able to cover its interest expenses better as
compared to its competitors, the profitability of the company has decreased
substantially over the years and it is well below the industry average.
• Since the total asset turnover is decreasing it indicates that the firm is unable
to utilize its plants and equipment efficiently.
• The higher ratio of receivable turnover as compared to the other companies
indicate that the firm has comparatively stringent credit policies therefore it
is able to convert its receivables into cash quite frequently.

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 CONCLUSION
• Abbott has an overall decreasing ratios as compared to its competitor
companies and the analysis indicates that the firm needs to focus on its
asset utilization.
• Along with it, Abbott should also focus on increasing its sales, either by
launching new products or by revising its marketing strategies.
• Moreover, the company should acquire more of long term debt financing
to improve its profitability.
• Overall the financial condition of the company is compromised and the
company needs to re-evaluate its financial and operating activities.

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