ABBOTT COMPANY AND ITS FINANCIAL STATEMENT ANALYSIS

USING RATIOS

ABBOTT COMPANY

Abbott is a famous and growing health care company. Its aim is to improve the health of people
of all ages and life stages. It provides good and sound health. Abbott is committed and it has
decentralized care so that many people can live their life fullest. It is located in approximately
more than 160 countries for more than 130 years ago. Some of the most challenging and life
threatening diseases of the world id carter by Abbott. Nutrition, diagnostic, medical devices and
medicines is the core aim of this organization. The company deliver long time impact on the
lives of people. It has achieved above market growth, strong cash flow and strong shareholder
returns. Portfolio of the company includes; nutrition, diagnostic, medical devices and medicines.
It has a prominent vision for the year 2030 to improve the lives of people and in order to do this,
they have to made progress in science, technology and healthcare. Established pharmaceuticals
( EPD) is presented by Abbott that offers high quality, trusted and affordable brand generic
medicines to improve others life by providing better treatment options. Some of the areas in EPD
includes; gastroenterology, respiratory, hospital care, vitamins, cardiovascular and metabolic
relies and so many more. 77 percent of total shares of the Abbott Company was invested in the
UK and it gradually expanded over the years. Protection of environment is the priority of the
company. Evolving their operations to reduce our environmental footprint will also aid in the
long-term development of a more resilient company. Over the previous year’s trade and other
payables increased due to the increase activity observed and the payable bills of import
shipments. More increase in the current liabilities id because of dividends unpaid due to the fact
that the parent company has not remitted. A well-defined, robust governance structure guarantees
that these facilities have the least negative environmental impact conceivable. Everyone at
Abbott places the individuals we serve at the center of everything they do. They design their
goods and services with their own families in mind. They understand that each of us plays an
important part in bringing our life-changing solutions to people all over the world. Abbott
products prvides better solution to the people so that they can live their lives. The company
earned the confidence by providing people with high quality products for the betterment of lives.
The quality of product is always the priority of Abbott and they have high level of governance
throughout their company. (Conquering the Unchartered, n.d.)

BUSINESS ACTIVITIES OF ABBOTT

BUSINESS SEGMENT
PROCESS
Established CHANNELS CUSTOMER
abbott is very much RELATIONSHIPS
phermaceuticals, third pirty
engaged in
nutritions, diognistics distributors are In-house sales help
marketing,
and diabbetes cares reponsible for the maintains the
processing of
are important transformation of customer relations of
different medicines
segment carried out medicines Abbott
and nutritions
by Abbott

CORPORATE SOCIAL RESPONSIBILITY

The company is built in order to improve the life style of people. They are there to provide
awareness and to help in the improvement of diagnosis. They strive in order to enhance their
circle and to help those people through education, camps for diagnosis, seminars, and different
sanitation facilities.

CALCULATIONS OF FINANCIAL STATEMNT OF RATIOS

The ratios that we considered for calculations are;

 Cash ratio
 Current ratio
 Current liabilities
 Quick ratio
 Net working capital ratio
CALCULATIONS

GIVEN FOR CALCULATING CURRENT RATIO

Current ratio = current assets / current liabilities

Current assets for different years are;

FOR THE YEAR 2022

Current assets = 21,829

FOR THE YEAR 2021

Current assets = 18,432

FOR THE YEAR 2020

Current assets = 15,703

FOR THE YEAR 2019

Current assets = 12,337

FOR THE YEAR 2018

Current assets = 13,696

Current liabilities for different years;

FOR THE YEAR 2022

Current liabilities = 14,607

FOR THE YEAR 2021

Current liabilities = 9,343

FOR THE YEAR 2020

Current liabilities = 6,834

FOR THE YEAR 2019

Current liabilities = 5,787

FOR THE YEAR 2018

Current liabilities = 5,961

By putting these values, we can calculate the current ratio of 5 years.

SOLUTION OF CURRENT RATIO

Current ratio = current assets / current liabilities

FOR YEAR 2022

Current ratio = 21,829/14,607

Current ratio = 1.4944

FOR YEAR 2021

Current ratio = 18,432/8,343

Current ratio = 2.209

FOR YEAR 2020

Current ratio = 15,703/6,834

Current ratio = 2.2977

FOR YEAR 2019

Current ratio = 12,337/5,787

Current ratio = 2.1318

FOR YEAR 2018

Current ratio = 12,998/5,961

Current ratio = 2.180

ANALYSIS OF RESULTS
Based on these calculations, it can be clearly seen that the ratio of current is mostly greater than
1.5 in the last five years. According to standards it is believed that the company having current
ratio greater than 1.5 is a good and better company proving every facilities. So, it can be
estimated based on these calculations that the current ratio for the next 3 years will also be in the
same range.

GIVEN FOR CALCULATING QUICK RATIO

QUICK RATIO = CASH + ACCOUNT RECEIVABLE / CURRENT LIABILITIES

Cash for different years are;

FOR THE YEAR 2022

Cash = 11,989

FOR THE YEAR 2021

Cash = 10,006

FOR THE YEAR 2020

Cash = 9,070

FOR THE YEAR 2019

CASH = 8,268

FOR THE YEAR 2018

Cash = 7191

Accounts receivable = 0

Current liabilities for different years;

FOR THE YEAR 2022

Current liabilities = 14,607

FOR THE YEAR 2021

Current liabilities = 9,343

 FOR THE YEAR 2020

Current liabilities = 6,834

FOR THE YEAR 2019

Current liabilities = 5,787

FOR THE YEAR 2018

Current liabilities = 5,961

By putting these values we can calculate the quick ratio;

SOLUTION FOR CALCULATING QUICK RATIO

QUICK RATIO = CASH + ACCOUNT RECEIVABLE / CURRENT LIABILITIES

FOR YEAR 2022

Quick ratio = 11,989 + 0/14,607

Quick ratio = 0.8207

FOR YEAR 2021

Quick ratio = 10,006 + 0/9,343

Quick ratio = 1.709

FOR YAER 2020

Quick ratio = 9,070 + 0/6,834

Quick ratio = 1.327

FOR YAER 2019

Quick ratio = 8,268 + 0/5,787

Quick ratio = 1.4287

FOR YEAR 2018

Quick ratio = 7,191 + 0/5,961

Quick ratio = 1.206

ANALYSIS

The value greater than 1 is considered to be a good range for quick ratio. From the above
calculations it can be clearly noted that the company’s quick ratio is indeed in a good ranges
means that it is the company providing better facilities. It can be predicted that the country will
continue its success in the same range for the next 3 years by looking in these calculations.

GIVEN FOR CALCULATING NET WORKING CAPITAL RATIO

NET WORKING CAPITAL RATIO = CURRENT ASSESTS – CURRENT LIABILITIES

Current assets for different years are;

FOR THE YEAR 2022

Current ratio = 21,829

FOR THE YEAR 2021

Current ratio = 18,432

FOR THE YEAR 2020

Current ratio = 15,703

FOR THE YEAR 2019

Current ratio = 12,337

2018

Current ratio = 13,696

Current liabilities for different years

FOR THE YEAR 2022

Current liabilities = 14,607

FOR THE YEAR 2021

Current liabilities = 9,343

FOR THE YEAR 2020

Current liabilities = 6,834

FOR THE YEAR 2019

Current liabilities = 5,787

FOR THE YEAR 2018

Current liabilities = 5,961

By putting these values, we can calculate net working capital ratio;

SOLUTION FOR CALCULATING NET WORKING CAPITAL RATIO

NET WORKING CAPITAL RATIO = CURRENT ASSESTS – CURRENT LIABILITIES

FOR YEAR 2022

Net working capital ratio = 21,828 – 14,607

Net working capital ratio = 7222

FOR YEAR 2021

Net working capital ratio = 18,432 – 9,343

Net working capital ratio = 9089

FOR YEAR 2020

Net working capital ratio = 15,703 – 6,834

Net working capital ratio = 8869

FOR YEAR 2019

Net working capital ratio = 12,337 – 5,787

Net working capital ratio = 3550

FOR YEAR 2018

Net working capital ratio = 12,998 – 5,961

Net working capital ratio = 7037

ANALYSIS

The net working capital ratio shows how much a company’s assets can meet with the current
liabilities. The current liabilities of the Abbott Company is less than its assets showing its
competency. So, for the next 3 years it can be easily predicted that the company will continue to
grow at the same ratio.

GIVEN FOR CALCULATING CASH RATIO

CASH RATIO = CASH AND BANK BALANVES + MARKETABLE SECURITIES –

CURRENT INVESTMENT / CURRENT LIABILITIES

Cash and bank balances of different years are;

FOR YEAR 2022

Cash and bank balances = 8,792

FOR YEAR 2021

Cash and bank balances = 6619

FOR YEAR 2020

Cash and bank balances = S7489

FOR YEAR 2019

Cash and bank balances = 2758

FOR YAER 2018

Cash and bank balances = 5678

Marketable securities = 0

Current investment = 0

Current liabilities for different years;

 FOR THE YEAR 2022

Current liabilities = 14,607

FOR THE YEAR 2021

Current liabilities = 9,343

FOR THE YEAR 2020

Current liabilities = 6,834

FOR THE YEAR 2019

Current liabilities = 5,787

FOR THE YEAR 2018

Current liabilities = 5,961

By putting these values, we can calculate cash ratio;

SOLUTION FOR CALCULATING CASH RATIO

CASH RATIO = CASH AND BANK BALANVES + MARKETABLE SECURITIES –

CURRENT INVESTMENT / CURRENT LIABILITIES

FOR YEAR 2022

Cash ratio = 8792 + 0 – 0 / 14,607

Cash ratio = 0.601

FOR YEAR 2021

Cash ratio = 6619 + 0 – 0 / 9343

Cash ratio = 0.708

FOR YEAR 2020

Cash ratio = 7489 + 0- 0 / 6,834

Cash ratio = 1.095

 FOR YEAR 2019

Cash ratio = 2758 + 0 – 0/ 5787

Cash ratio = 0.476

FOR YEAR 2018

Cash ratio = 5678 + 0 – 0 / 5,961

Cash ratio = 0.952

ANALYSIS

The range of cash ratio of company from the last five years is between 0.5-1. According to
standards, company having this ratio in cash is in good condition. So, from every aspect it can be
said that the next 3 years of the company will also be in an excellent range.

GIVEN FOR CALCULATING RETURN ON ASSETS RATIO

RETURN ON ASSETS RATIO = NET INCOME / AVERAGE TOTAL ASSETS

In order to calculate this ratio, first we have to calculate the average total assets;

Total assets of current year for year 2022 = 33920

Assets of previous year = 28,567

Average total assets of year 2022 = 33920 + 28,567 / 2

Average total assets of year 2022 = 31242.5

Total assets of current year for year 2021 = 28,567

Assets of previous year = 24,916

Average of total assets of year 2021 = 28,567 + 24,916 / 2

Average of total assets of year 2021 = 26741.5

Total assets of current year for year 2020 = 24,916

Assets of previous year = 20,752

Average total assets of year 2020 = 24,916 + 20,752 / 2

Average total assets of year 2020 = 22834

Total assets of current year for year 2019 = 20,752

Assets of previous year = 20281

Average total assets of year 2019 = 20,752 + 20281 / 2

Average of total assets of year 2019 = 20519.5

Total assets of current year for year 2018 = 20281

Assets of previous year = 19,188

Average of total assets of year 2019 = 20281 + 19,188 / 2

Average of total assets of year 2019 = 19734

Net income of 5 years are;

FOR THE YEAR 2022

Net income = 49,258

FOR THE YEAR 2021

Net income = 42570

FOR YEAR 2020

Net income = 35283

FOR YEAR 2019

Net income = 30,156

FOR YEAR 2018

Net income = 29,719

By putting these values, we can calculate return on assets ratio;

SOLUTION FOR CALCULATING RETURN ON ASSETS RATIO

 RETURN ON ASSETS RATIO = NET INCOME / AVERAGE TOTAL ASSETS

FOR YEAR 2022

Return on assets ratio = 49258 / 3142.5

Return on assets ratio = 1.5766

FOR YEAR 2021

Return on assets ratio = 42570/26741.5

Return on assets ratio = 1.591

FOR YEAR 2020

Return on assets ratio = 35,283/22,834

Return on assets ratio = 1.545

FOR YEAR 2019

Return on assets ratio = 30,156/20519.5

Return on assets ratio = 1.4696

FOR YEAR 2018

Return on assets ratio = 29,719/19,734

Return on assets ratio = 1.505

ANALYSIS

The higher the return on assets ratio there is the less will be loss and more will be the profit.
Based on these calculations, it can be seen that the return on assets ration of the company is
continuously in a higher range showing its profit for the last 5 years. So, it can be said that the
company will have even higher ratio for the next 3 years too.

ANALYSIS OF FINANCIAL PERFORMANCE

Financial statement of company shows detailed information about company’s state of affair, cash
flows, equity, and many more. The records for financial statement of the company is kept secure.
For preparing the financial statement appropriate and best practices were followed. Against any
material law, company has great internal control system that provides them with confidence.
Regular audit is carried out in this controlled mechanism. The standards are viewed on regular
basis and deviation is observed in their mechanism. These standards and mechanisms help them
in carrying out best practices and requirements. More increase in the current liabilities id because
of dividends unpaid due to the fact that the parent company has not remitted. A well-defined,
robust governance structure guarantees that these facilities have the least negative environmental
impact conceivable. Everyone at Abbott places the individuals they serve at the center of
everything they do. They design their goods and services with their own families in mind. The
company deliver long time impact on the lives of people. It has greatly achieved above market
growth, strong cash flow and strong shareholder returns. Their financial statement can be clearly
seen through the calculations above which strongly focus on the struggle, competence and
success of Abbott. The company proves to be successful even in the worst economic recession
and this is the reason of their success as compared to their competitors. Over the previous year’s
trade and other payables increased due to the increase activity observed and the payable bills of
import shipments and this shows their struggle and achievement.

SALES

Over the period years, net sales of the company increased by approximately 15.7%. These
calculations are in accordance with their annual report of recent year that is 2022. Sales of
pharmaceuticals rose by 14.2 %.this percentage is maintained thoroughly by maintaining their
performance over the period of years in a constant manner. Similarly, nutritional sales increased
by the percentage of 23.1 % because of the increase in the sales of nutritional supplements. An
increment of 9.4 % is observed for the diagnostic sales, while the diabetes sale rose by 8.9 %.

CURRENT ASSETS

An increase in the trade stock causes the increase in the current assets of the product cost. This
resulted in the increase in receivable tax sales which is the payment paid on the imports and local
purchase but is not currently refunded by the tax authorities.
CURRENT LIABILITIES

Over the previous year’s trade and other payables increased due to the increase activity observed
and the payable bills of trades. More increase in the current liabilities id because of dividends
unpaid due to the fact that the parent company has not remitted.

SELLING AND DISTRIBUTION EXPENSES

An increase of 7.1 % was observed in the selling and distribution expenses. This percentage
consists of inflation, higher salaries and higher promotional activities. Increase in the expense of
travelling on account of many factors also contributes in this increase of 7.1%. Similarly, a
decrease of percentage was observed in the sales of recent year compared to the previous year.

ADMINISTRATIVE EXPENSES

Increase of 22.7 % was observed in the administrative expenses due to depreciation increment.
Impact of inflation, increase in the utilities and higher salaries because of annual increment are
also achieved by the administrative department.

EQUITY

Over the period of years there is a minimum decrease in equity for the year 2021 and interim
dividend for the year 2022. These are especially partially offset by the year’s profit. Rs. 20 per
year for the year 2021 and Rs. 15 for the year 2022 was achieved. (AMANDA, 2019)

CASH FLOWS

Because of activities being carried out in the operational department a net decrease in the net
cash flows is seen. This happens due to the decrease in the profit prior to tax and because of
some unfavorable conditions driven primarily by increase in stock in trade.

PROFITABILITY RATIOS

The ratio have generally decreased compared to last year, owing primarily to currency
depreciation, inflation, and higher product costs. The gross profit margin fell from the percentage
of 37.8 to the previous year to 29.5% this year. This mainly happened because of some
unfavorable conditions that generally caused an increase in the stock’s trade. However, inflation
is the major cause which is at its peak currently.
LIQUIDITY RATIOS

Cash inflows from operating activities decreased compared to the previous year, owing primarily
to unfavorable working capital changes caused primarily by stock in trade.

CURRENT RATIO

Because of higher inventory levels and an increase in current liabilities, the cash to current
liabilities ratio has decreased compared to last year. (Husna & Satria, 2019)

COMMENTS ON FREE CASH FLOWS

Free cash of company decrease than the last year and this is because of the decrease in profit
before tax. This happens when there are some unfavorable conditions that results in the increase
in trade’s stock. (Wang, 2010)

COMPARISON OF ABBOTT WITH OTHER INDUSTRIES

For ages Abbott has been considered to be among the top company’s in the world. They allow
and provides sales even when there is an economic recession going on. They competed with their
competitors by focusing on research and development. They give long haul medicines care that
helps them carter large number of audience and strong among other companies.

REFERENCES

AMANDA, R. I. (2019). The Impact Of Cash Turnover, Receivable Turnover, Inventory

Turnover, Current Ratio And Debt To Equity Ratio On Profitability. Journal of Research in
Management, 2(2), 14–22. https://doi.org/10.32424/jorim.v2i2.66

Conquering the unchartered. (n.d.).

Husna, A., & Satria, I. (2019). Effects of Return on Asset, Debt To Asset Ratio, Current Ratio,
Firm Size, and Dividend Payout Ratio on Firm Value. International Journal of Economics
and Financial Issues, 9(5), 50–54. https://doi.org/10.32479/ijefi.8595

Wang, G. Y. (2010). The Impacts of Free Cash Flows and Agency Costs on Firm Performance.
Journal of Service Science and Management, 03(04), 408–418.
https://doi.org/10.4236/jssm.2010.34047