Exhibit 6.5 presents common-size income statements and balance sheets for seven firms that operate at various...

  

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Exhibit 6.5 presents common-size income statements and balance sheets for seven firms that operate at various stages in the value chain for the pharmaceutical industry. (The companies are real, but the names have been disguised.) These common-size statements express all amounts as a percentage of sales revenue. Exhibit 6.5 also shows the cash flow from operations to capital expenditures ratio 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 disclosed. The seven companies and a brief description of their activities follow. Required Match the financial statements with the company described below. Give the reasons for your choice. Be as specific as possible in explaining why you chose a particular set of financial statements for one of the below companies. 1. Wilson Pharma: Engages in the development, manufacture, and sale of ethical drugs (i.e., drugs requiring a prescription). Ethical drug companies must obtain approval of new drugs from government regulators, such as the US Food and Drug Administration (FDA). Patents protect such drugs from competition until either other drug companies develop more effective products or the patent expires. 2. American Biotech: Engages in the development, manufacture, and sale of drugs based on biotechnology research. The biotechnology segment is less mature than the ethical drug industry, with relatively few products having received regulatory approval. 3. Mauborgne Laboratories: Engages in the development, manufacture, and sale of generic drugs. Generics have the same chemical compositions as drugs that had previously benefited from patent protection. In recent years, generic drug companies have benefited from the patent expiration of several blockbuster ethical drugs. However, the big ethical drug companies have increasingly offered generic versions of their products to compete against generic drug companies. 4. Morris & Morris: A huge global enterprise that engages in the development, manufacture, and sale of over-the-counter health care products. Also, the company operates in consumer segments where brand recognition is important. 5. Chang Labs: Offers laboratory testing services and expedition of the drug approval process for ethical drug companies. Cost of goods sold for this company represents the salaries of personnel conducting the laboratory testing and drug approval services. 6. Crimson Health: Distributes drugs as a wholesaler to drugstores and primary care facilities, including hospitals and clinics. It also offers pharmaceutical benefit management services (PBMS) to help customers order more efficiently, contain costs, and monitor their purchases. Cost of goods sold includes the cost of drugs sold plus the salaries of personnel providing PBMS. 7. Eberhard: Operates a nationwide chain of drugstores, some of which are owned while others are leased. Exhibit 6.5 Common-size financial statement data (1) (2) (3) (4) (5) (6) (7) Income statement Sales Cost of goods sold Selling and administrative Rescarch and development 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (47.0) (18.8) (8.0) (58.4) (31.0) (28.9) (36.3) (10.9) (1.6) (6.8) (73.3) (21.0) (92.5) 14.2) (11.0) (24.2) (21.5) 1.3) (14.1) (24.0) (36.7) (13.2) (1.0) (7.0) (1.5) 1. Interest (2.6) (3.2) 13) (1.0) (2) Income taxes.. (10.6) (2.2) Other... 3.5 5.2 1.0 1.4 Net income 19.1% 34.1% 16.6% 5.8% 16.9% 3.6% 1.8% Exhibit 6.5 presents common-size income statements and balance sheets for seven firms that operate at various stages in the value chain for the pharmaceutical industry. (The companies are real, but the names have been disguised.) These common-size statements express all amounts as a percentage of sales revenue. Exhibit 6.5 also shows the cash flow from operations to capital expenditures ratio 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 disclosed. The seven companies and a brief description of their activities follow. Required Match the financial statements with the company described below. Give the reasons for your choice. Be as specific as possible in explaining why you chose a particular set of financial statements for one of the below companies. 1. Wilson Pharma: Engages in the development, manufacture, and sale of ethical drugs (i.e., drugs requiring a prescription). Ethical drug companies must obtain approval of new drugs from government regulators, such as the US Food and Drug Administration (FDA). Patents protect such drugs from competition until either other drug companies develop more effective products or the patent expires. 2. American Biotech: Engages in the development, manufacture, and sale of drugs based on biotechnology research. The biotechnology segment is less mature than the ethical drug industry, with relatively few products having received regulatory approval. 3. Mauborgne Laboratories: Engages in the development, manufacture, and sale of generic drugs. Generics have the same chemical compositions as drugs that had previously benefited from patent protection. In recent years, generic drug companies have benefited from the patent expiration of several blockbuster ethical drugs. However, the big ethical drug companies have increasingly offered generic versions of their products to compete against generic drug companies. 4. Morris & Morris: A huge global enterprise that engages in the development, manufacture, and sale of over-the-counter health care products. Also, the company operates in consumer segments where brand recognition is important. 5. Chang Labs: Offers laboratory testing services and expedition of the drug approval process for ethical drug companies. Cost of goods sold for this company represents the salaries of personnel conducting the laboratory testing and drug approval services. 6. Crimson Health: Distributes drugs as a wholesaler to drugstores and primary care facilities, including hospitals and clinics. It also offers pharmaceutical benefit management services (PBMS) to help customers order more efficiently, contain costs, and monitor their purchases. Cost of goods sold includes the cost of drugs sold plus the salaries of personnel providing PBMS. 7. Eberhard: Operates a nationwide chain of drugstores, some of which are owned while others are leased. Exhibit 6.5 Common-size financial statement data (1) (2) (3) (4) (5) (6) (7) Income statement Sales Cost of goods sold Selling and administrative Rescarch and development 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (47.0) (18.8) (8.0) (58.4) (31.0) (28.9) (36.3) (10.9) (1.6) (6.8) (73.3) (21.0) (92.5) 14.2) (11.0) (24.2) (21.5) 1.3) (14.1) (24.0) (36.7) (13.2) (1.0) (7.0) (1.5) 1. Interest (2.6) (3.2) 13) (1.0) (2) Income taxes.. (10.6) (2.2) Other... 3.5 5.2 1.0 1.4 Net income 19.1% 34.1% 16.6% 5.8% 16.9% 3.6% 1.8%

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In this common statement analysis there is a total of seven companies data are available according to the available data we can see that the Net incom... View the full answer