Would You Advise a Friend to Invest in Pfizer Company?

Introduction

The definitions and equations for different proportions used to figure according to Pfizer's Income Statement, Balance Sheet, and Cash Flow are recorded beneath.

 

Debt Ratio

The debt ratio is the financial measure that assesses a organizations financial leverage. The total debt ratio to all assets is called as the debt-to-asset ratio.

Total Liabilities/ Total Assets

Gross Profit Margin

The difference between revenue and cost of goods sold divided by revenue is the profit margin. The measure is used to evaluate a company's financial health and business strategy since it shows how much money is left over after sales (Tuck, 2019).

Revenue - COG/ Revenue

 

Free Cash Flow

This is the measure that allows the organization to calculate its cash flow and understand how much cash is available for the distribution to the organization’s stockholders.

Operating Cash Flow - Capital Expenditure

 

Times Interest Earned

This is the interest coverage ratio, or the times interest generated, is a measure that calculates an organization’s capacity to decide its debt obligations. It's calculated by dividing EBIT or EBITDA by interest expense.

EBIT/Interest Expenses

 

Accounts Receivable Turnover

This means an accounting statistic that calculates how successful a compant is at extending financial credit and collecting debt.

Total Turnover/Average Receivables

 

Inventory Turnover

This means accounting metric that counts how much times inventory is sold or used in a particular time frame.

COGS/Average Inventory

Current Ratio

Industry average for current ratio is 5.36. Pfizer has very low current ratio compared to the average ratio.

	2020
Current Ratio	1.48

Debt Ratio

The average debt ratio for the pharmaceutical industry is 0.34, comparatively Pfizer has more debt ratio than the industry average across the country.

	2020
Total Assets	154,229,000
Total Liabilities	90,756,000
Debt Ratio	0.59

Gross Profit Margin

For the financial year of 2020, the industry average is 0.72 which is less than the gross profit margin of Pfizer (0.79).

	2020
Gross Profit	33,216,000
Total Revenue	41,908,000
Gross Profit Margin	0.79

Times Interest Earned

Industry average is 5.61 times and Pfizer has a greater value than the industry average

	2020
EBIT	8,946,000
Interest Expense	1,449,000
Times Interest Earned	6.17

Accounts Receivable Turnover

Industry average is 4.48 for AR turnover and Pfizer has a lesser value for this ratio.

	2020
Total Debt	38,274,000
Net Debt	36,490,000
Accounts Receivable (Asset)	154,229,000
Net Credit Sales	1,784,000
Accounts receivable turnover	0.012

Industry average for return on sales is -1.6 while Pfizer has 0.27.

Industry average for asset turnover ratio is 1.53 while Pfizer has 0.27.

Industry average for financial leverage ratio is 1.65 while Pfizer has 2.43.

Industry average for financial leverage ratio is -7.0 while Pfizer has 6.64.

Industry average for financial leverage ratio is 9.51 while Pfizer has 14.0

	2020
Net Sales or Total revenue	41,908,000
Net Income	11,138,000
Total Assets	154,229,000
Return on Sales	0.27
Asset turnover	0.27
Financial Leverage	2.43

Profitability:

This is a metric of an organization’s industry success. We can foresee the profitability of a firm by using the profitability ratio. This profitability ratio determines how profit is generated in relation to sales, net worth and net assets.

Based on the values provided for the Pfizer for the years 2019 and 2020:

· In 2019, Pfizer was profitable in the aspects of revenue, total assets, and gross profit.

· In 2020, Pfizer was profitable in the aspects of revenue, total assets, and gross profit.

 

Efficiency

The receivables and inventory of a company are used to find if it is a bettwr investment or not. Keeping inventory levels less will make the company efficient since it is the inventory that will be aligned with sales.

Pfizer's revenue in 2020 was 41,908,000 dollars. Pfizer's revenue in 2019 was 51,750,000 dollars.

Pfizer's inventory in 2019 was 53,715,000 dollars. Pfizer's inventory in 2020 was 50,982,000 dollars. 

Since the inventory figures are lower than the revenue, we can say that Pfizer was efficient in 2019 and 2020. 

 

Liquidity

Liquidity is called as the ability to meet the short-term financial obligations. The liquidity ratio calculates a company's capacity to meet its debt obligations. And that is calculated by comparing a firm’s cash-convertible liquid assets.

Pfizer's short-term debt was 1,537,000 dollars in 2019. Pfizer's short-term debt was 2,012,000 dollars in 2020.

As the short debt money are lower than the income, the company can meet its short term debts, and indicating that the liquidity levels are adequate.

 

Solvency 

Solvency means a company's ability to pay down long-term debts, which includes interest.

Pfizer's long-term debt was 16,342,000 dollars in 2019. Pfizer's long-term debt was 21,535,000 dollars in 2020.

Assets-Liabilities are also considered when calculating the net worth.

Pfizer's net worth in 2019 was 14,387,000 dollars. Pfizer's net worth in 2020 was 12,292,000 dollars.

As the long term debt amounts are more than the net value, the organization’s capacity to pay back its long-term obligations is very limited, which means that the company is not effectively solvent.

References

Gross Profit Margin Definition, Formula, Calculation, and Example. Investing Answers. (n.d.). Retrieved July 22, 2021, from https://investinganswers.com/dictionary/grossprofitmargin

Tuck, J. (2019, February 5). Definition of Net Worth in Accounting. Retrieved July 22, 2021, from https://smallbusiness.chron.com/definition-net-worth-accounting-24909.html

What is profitability? (n.d.). Retrieved July 22, 2021, from https://www.investopedia.com/terms/d/debtratio.asp