Exhibit 1.16 presents common-size income statements and balance sheets for six firms that operate at various...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Exhibit 1.16 presents common-size income statements and balance sheets for six firms that operate at various stages in the value chain for the pharmaceutical industry. These common-size statements express all amounts as a percentage of sales revenue. Exhibit 1.16 also shows the cash flow from operations to capital expenditures ratios for each firm. A dash for a particular financial statement item does not necessarily mean that the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. The six companies and a brief description of their activities appear below. Wyeth: Engages in the development, manufacture, and sale of ethical drugs (that is, drugs requiring a prescription). The drugs of Wyeth primarily represent mixtures of chemical compounds. Ethical drug companies must obtain approval of new drugs from the Food and Drug Administration (FDA). Patents protect such drugs from competition until either other drug compa- nies develop more effective substitutes or the patent expires. Amgen: Engages in the development, manufacture, and sale of drugs based on biotechnology rescarch. Biotechnology drugs must obtain approval from the FDA and enjoy patent protection similar to those for chemical-based drugs. The biotechnology segment is less mature than the ethical drug industry, with relatively few products having received FDA approval. Johnson & Johnson: Engages in the development, manufacture, and sale of over-the-counter health care products. Such products do not require a pre- scription and often benefit from brand recognition. Quintiles: Offers laboratory testing services and expedition of the drug approval process through the FDA for ethical drug companies that have discovered new drugs. Cost of goods sold for this company represents the salaries of personnel conducting the laboratory testing and drug approval services. Cardinal Health: Distributes drugs as a wholesaler to drugstores, hospitals, and mass merchandisers. Also offers pharmaceutical benefit management services in which it provides customized databases designed to help customers order more efficiently, contain costs, and monitor their purchases. Cost of goods sold for Cardinal Health includes the cost of drugs sold plus the salaries of personnel providing pharmaceutical benefit management services. Walgreen: Operates a chain of drug stores nationwide. The data in Exhibit 1.16 for Walgreen include the recognition of operating lease commitments for retail space. Required Use whatever clues that you can to match the six companies above with the six companies in Exhibit 1.16. Company 1 2 3 4 Income Statement Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Goods Sold (11.0) (24.0) (58.4) (28.9) (73.3) (92.5) Selling and Administrative (24.2) (36.7) (31.0) (36.3) (21.0) (4.2) Research and Development (21.5) (13.2) (10.9) Interest (0.3) (1.0) (2.6) (1.6) (0.3) Income Taxes (14.1) (7.0) (3.2) (6.8) (2.2) (1.0) Other 5.2 (1.5) 1.0 1.4 0.1 (0.2) Net Income 34.1% 16.6% 5.8% 16.9% 3.6% 1.8% Balance Sheet Cash 66.3% 21.4% 34.9% 24.2% 0.1% 1.9% Receivables 12.3 19.4 26.4 14.0 3.2 5.0 Inventories 8.9 12.4 9.1 14.1 13.1 Other Current 8.6 15.9 5.4 8.7 0.4 2.3 Property, Plant, and Equipment (net) 48.5 44.6 22.4 23.4 17.7 3.8 Other Noncurrent Assets 15.9 48.9 31.2 37.2 0.4 (4.4) Total Assets 160.5% 162.6% 120.3% 116.6% 35.9% 30.5% Current Liabilities 25.0% 51.4% 28.5% 24.4% 12.2% 13.7% Long-term Debt 5.6 11.4 2.0 6.5 3.9 Other Noncurrent Liabilities 23.8 12.3 2.6 1.6 Shareholders' Equity 129.9 76.0 89.8 73.4 21.1 11.3 Total Equities 160.5% 162.6% 120.3% 116.6% 35.9% 30.5% Cash Flow from Operations / Capital Expenditures 3.4 2.3 1.3 2.8 0.6 1.3 Exhibit 1.16 presents common-size income statements and balance sheets for six firms that operate at various stages in the value chain for the pharmaceutical industry. These common-size statements express all amounts as a percentage of sales revenue. Exhibit 1.16 also shows the cash flow from operations to capital expenditures ratios for each firm. A dash for a particular financial statement item does not necessarily mean that the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. The six companies and a brief description of their activities appear below. Wyeth: Engages in the development, manufacture, and sale of ethical drugs (that is, drugs requiring a prescription). The drugs of Wyeth primarily represent mixtures of chemical compounds. Ethical drug companies must obtain approval of new drugs from the Food and Drug Administration (FDA). Patents protect such drugs from competition until either other drug compa- nies develop more effective substitutes or the patent expires. Amgen: Engages in the development, manufacture, and sale of drugs based on biotechnology rescarch. Biotechnology drugs must obtain approval from the FDA and enjoy patent protection similar to those for chemical-based drugs. The biotechnology segment is less mature than the ethical drug industry, with relatively few products having received FDA approval. Johnson & Johnson: Engages in the development, manufacture, and sale of over-the-counter health care products. Such products do not require a pre- scription and often benefit from brand recognition. Quintiles: Offers laboratory testing services and expedition of the drug approval process through the FDA for ethical drug companies that have discovered new drugs. Cost of goods sold for this company represents the salaries of personnel conducting the laboratory testing and drug approval services. Cardinal Health: Distributes drugs as a wholesaler to drugstores, hospitals, and mass merchandisers. Also offers pharmaceutical benefit management services in which it provides customized databases designed to help customers order more efficiently, contain costs, and monitor their purchases. Cost of goods sold for Cardinal Health includes the cost of drugs sold plus the salaries of personnel providing pharmaceutical benefit management services. Walgreen: Operates a chain of drug stores nationwide. The data in Exhibit 1.16 for Walgreen include the recognition of operating lease commitments for retail space. Required Use whatever clues that you can to match the six companies above with the six companies in Exhibit 1.16. Company 1 2 3 4 Income Statement Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Goods Sold (11.0) (24.0) (58.4) (28.9) (73.3) (92.5) Selling and Administrative (24.2) (36.7) (31.0) (36.3) (21.0) (4.2) Research and Development (21.5) (13.2) (10.9) Interest (0.3) (1.0) (2.6) (1.6) (0.3) Income Taxes (14.1) (7.0) (3.2) (6.8) (2.2) (1.0) Other 5.2 (1.5) 1.0 1.4 0.1 (0.2) Net Income 34.1% 16.6% 5.8% 16.9% 3.6% 1.8% Balance Sheet Cash 66.3% 21.4% 34.9% 24.2% 0.1% 1.9% Receivables 12.3 19.4 26.4 14.0 3.2 5.0 Inventories 8.9 12.4 9.1 14.1 13.1 Other Current 8.6 15.9 5.4 8.7 0.4 2.3 Property, Plant, and Equipment (net) 48.5 44.6 22.4 23.4 17.7 3.8 Other Noncurrent Assets 15.9 48.9 31.2 37.2 0.4 (4.4) Total Assets 160.5% 162.6% 120.3% 116.6% 35.9% 30.5% Current Liabilities 25.0% 51.4% 28.5% 24.4% 12.2% 13.7% Long-term Debt 5.6 11.4 2.0 6.5 3.9 Other Noncurrent Liabilities 23.8 12.3 2.6 1.6 Shareholders' Equity 129.9 76.0 89.8 73.4 21.1 11.3 Total Equities 160.5% 162.6% 120.3% 116.6% 35.9% 30.5% Cash Flow from Operations / Capital Expenditures 3.4 2.3 1.3 2.8 0.6 1.3
Expert Answer:
Answer rating: 100% (QA)
The data for each company from exhibit 116 corresponds as Wyeth Th... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Sales for 2017 were $245,000, and the cost of goods sold was 60 percent of sales Selling and administrative expense was $24,500 Depreciation expense was 8 percent of plant and equipment (gross) at...
-
LearnCo LearnCo manufactures and sells one product, an abacus for classroom use, with two models, the Basic model and the Deluxe model, The company began operations on January 1, 20Y1, and is...
-
Suppose that nominal GDP was $9500000.00 in 2005 in Fairfax County Virginia. In 2015, nominal GDP was $11500000.00 in Fairfax County Virginia. The price level rose 2.00% between 2005 and 2015, and...
-
Abardeen Corporation borrowed $90,000 from the bank on October 1, 2016. The note had an 8percent annual rate of interest and matured on March 31, 2017. Interest and principal were paid in cash on the...
-
If a monopoly is losing money then when should it shut down?
-
Consider an estimated equation for workers earning an hourly wage, wage,where educ, years of schooling, and exper, actual years in the workforce, are measured in years. The dependent variable is...
-
Mr. Jones was considering a new grapefruit venture that would generate a random sequence of yearly cash flows. He asked his son. Gavin, "People tell me I should use a cost of capital figure to...
-
Mr. Wellington has prepared the following list of statements about service companies and merchandisers. 1. Measuring net income for a merchandiser is conceptually the same as for a service company....
-
(a) Consider a put option on a non-dividend paying stock when the stock price is 4.50, the exercise price is 5.00, the continuously compounded rate of return is 3.5% per annum, the volatility is 18%...
-
Two MNCs have mirror-image financing needs for their foreign direct investments: they need to borrow money for 8 years. The amount of borrowing is $2,900,000 or the equivalent amount at the current...
-
you'll have the opportunity to apply the skills and knowledge gained over the six courses to the real-life merger of Dollar Tree and Family Dollar.One of the issues to think about for the merger is...
-
A condition that may increase either the severity or frequency of an economic loss is: A. Adverse selection. B. Hazard. C. Peril. D. Risk.
-
A pooled income fund is a_______ created by a________ . A. Charity/trust. B. Foundation/university. C. Nonprofit/donor. D. Trust/charity.
-
Which of the following is not an element of an insurable risk? A. A sufficiently large number of homogeneous exposure units. B. Catastrophic loss. C. A definite loss. D. A fortuitous loss.
-
Gene MacArthur, a wealthy 55-year-old widower, wants to reduce his taxable estate, supplement his current income, provide an inheritance for his children, and benefit his alma mater. He doesnt want...
-
In which does a donor transfer cash, marketable securities, or other assets to a qualified charitable organization in exchange for a commitment by the organization to pay the donor a specified amount...
-
John and Kent share profits and losses of 60% and 40%, respectively. The tax basis of each partner's interest in the partnership as of December 31, Year 1, was as follows: John $24,000 Kent 18,000...
-
Write a function that reads a Float24_t value: Float24_t float24_read(void) A legitimate float24 value string is of the form: "mantissabexponent" where the mantissa (m) and the exponent (e) may have...
-
Selected ï¬nancial information for Harrison, Inc. is shown next (in thousands). Required: (a) What account creates the difference between gross and net accounts receivable? What does this...
-
Following are denitions or descriptions of terms relating to ratio analysis. (1) Involves studying the relationship between two or more nancial statement items (2) Indicates the amount that investors...
-
You are the owner of a small movie-rental store run by a full-time manager. Required: (a) Develop a brief mission statement for your business. (b) Prepare a balanced scorecard for the manager,...
-
A bank offers customers the option of receiving interest compounded quarterly, semi-annually, or annually. If the rate of interest is the same, which is the best option for the customer?
-
The director of marketing of your organization asks for your advice regarding sponsorship deals she is contemplating. She has to choose from the following: a 15-year sponsorship paying \($100,000\)...
-
An athlete signs a five-year endorsement deal with a prominent sponsor. Under this deal the athlete will receive \($5,000\) each year for the first three years and \($6,500\) each year for the final...
Study smarter with the SolutionInn App