Finance-MBAA 518 – Managerial Finance

| January 30, 2017

Question

Final Paper

Ivan A. Primak.docx#_msocom_1″>[ARP1]

Embry Riddle.docx#_msocom_2″>[ARP2] University

MBAA 518 – Managerial Finance

Instructor: Dr. Al Rodriguez

September 28, 2015

Profitability

Pfizer Inc. has huge profitability ratios of the order of 80% as gross profit margin and around 25% as net profit margin..docx#_msocom_3″>[ARP3]

The company is highly profitable.docx#_msocom_4″>[ARP4]. As compared to the competitor, GlaxoSmithKline, they are much better.docx#_msocom_5″>[ARP5]. For GSK same ratios are 70% and 17%.

Hence, Pfizer is much better than the competitor in terms of the profitability..docx#_msocom_6″>[ARP6]

Gross profit margin

80.79%

70.13%

Net Profit Margin

24.70%

17.27%.docx#_msocom_7″>[ARP7]

Cash Flows.docx#_msocom_8″>[ARP8]

For Pfizer:

Total cash flow from operating activities: 17,054,000NetIncome is just:14,570,000.docx#_msocom_9″>[ARP9]

Net Income

14,570,000

Depreciation

7,611,000

Adjustments To Net Income

-3,213,000

Changes In Accounts Receivables

275,000

Changes In Liabilities

-2,859,000

Changes In Inventories

-631,000

Changes In Other Operating Activities

1,273,000

Total Cash Flow From Operating Activities

17,054,000

There are many adjustments that need.docx#_msocom_10″>[ARP10]to be done from net income to calculate total cash flow from operating activities. First, all the non-cash activities, such as depreciation, must be added like back Then all the adjustments would be done. After that change in the assets and liabilities like PPE,receivables, payables, etc. would be added or subtracted to get the final cash flow.

Liquidity and Capital Structure:

Current ratio

2.15

0.99

Quick Ratio

1.58

0.67

Pfizer has a good advantage in terms of the liquidity. The company is highly liquid given the current and quick ratios..docx#_msocom_11″>[ARP11]The current ratiofor the company is more than 2. Even after deleting the inventory part to calculate the quick ratio as 1.58. It clearly signifies that the company would be able to meet all the obligations even in the worst case scenario of inventory stalling. Even if inventory does not get sold off, they will be able to meet all the liabilities fully and after that they will have 50% left.

Comparing with GSK, Pfizer is in a much better situation. For GSK, both the ratios are less than 1. That means they won’t be able to meet the obligations in the short term. They need to raise the capital from somewhere to pay for the liabilities.

Capital Structure

DE ratio

0.46

DE.docx#_msocom_12″>[ARP12] Ratio for the company is just 0.46. That means for every $1 of equity they have a liability of less than half a dollar.Approximately31.5%.docx#_msocom_13″>[ARP13] is debt and rest is equity.docx#_msocom_14″>[ARP14]. This.docx#_msocom_15″>[ARP15] is a good mix of capital. This mix clearly illustrates less financial risk for the company.

DE for GSKis greater than 253. They have huge.docx#_msocom_16″>[ARP16] debt as compared to the equity they have invested. There is a huge risk.docx#_msocom_17″>[ARP17]for the company to operate. Once bad.docx#_msocom_18″>[ARP18] time starts, the company will face a lot of problems.

Stock recommendation

As of september 28, 2015, Currently Pfizer is trading at around $32.90.docx#_msocom_19″>[ARP19].

There are many factors that support investment in the company.docx#_msocom_20″>[ARP20]:

Return on Equity is around 18%and it is estimated to grow further.docx#_msocom_21″>[ARP21], giving the shareholders much higher returns. They have a good dividend policy.docx#_msocom_22″>[ARP22].docx#_msocom_23″>[N23]; hence for a person looking for liquidity, this is a good stock. Pfizer’s dividend was cut in 2009, but has increased annually since then. Pfizer has been paying dividends since 1980 and has not missed one since then.The revenue is set to increase following the major breakthrough and the new patents that the company received recently. This makes this company more attractive. At the time when the industry is struggling to keep the profitability, Pfizer has not only been able to maintain market share but also maintained the trust among the consumers.Therefore, it is strongly recommended to buy stocks of Pfizer.

References

Pfizer Financial Reports. (n.d.). Retrieved September 26, 2015, from

http://www.pfizer.com/investors/financial_reports/financial_reports

Pfizer Inc. (n.d.). Retrieved September 26, 2015, from

http://www.google.com/finance?q=NYSE:PFE&ei=RXgJVqikNYXCea3woKgL

.docx#_msoanchor_1″>[ARP1]Ivan, you are using simple, sort-worded sentences. Please try to be more explicit and support all ascertions with the source. Try to write a more comprehensive report, with more detail.

Do not just indicate something without also providing the support.

Make sure to label all trables properly as per APA.

Add more substance to the paper.

Thanks, Al

.docx#_msoanchor_2″>[ARP2]Hyphenate and use full University name

.docx#_msoanchor_3″>[ARP3]So what does this mean in terms of importance and why?

.docx#_msoanchor_4″>[ARP4]Highly is a subjective, be more specific with the facts and support why it is so.

.docx#_msoanchor_5″>[ARP5]Better can only be explained with capitalization.

.docx#_msoanchor_6″>[ARP6]How is profitability defined? Why is it much better?

.docx#_msoanchor_7″>[ARP7]Label the tables. Use column labels.

.docx#_msoanchor_8″>[ARP8]How do CF’s compare with GSK?

.docx#_msoanchor_9″>[ARP9]Why only operating activities? What about investing and financing?

.docx#_msoanchor_10″>[ARP10]If there are many, why only talk about depreciation? Which are the others?

.docx#_msoanchor_11″>[ARP11]What does 2.15 mean in relationship to others in the industry? What is the difference between 2.15 and 0.99? Same for the quick ratio.

.docx#_msoanchor_12″>[ARP12]Need to define it before initials can be used. Also, should probably be D/E.

.docx#_msoanchor_13″>[ARP13]This number does not agree with the previous statement.

.docx#_msoanchor_14″>[ARP14]Write using complete sentences. Also, with 31.5% debt and 68.5% equity.

Make sure that you check these numbers.

.docx#_msoanchor_15″>[ARP15]Unclear antecedent.

.docx#_msoanchor_16″>[ARP16]Define what shis means.

.docx#_msoanchor_17″>[ARP17]Define what is meant by this.

.docx#_msoanchor_18″>[ARP18]Define what this means.

.docx#_msoanchor_19″>[ARP19]If the paper is read one year from today, it is no longer currently, therefore, say something like.

As of the MMDDYYYY the stock is rading at $xx.xx

.docx#_msoanchor_20″>[ARP20]Which are these factors? Also consider future trends

.docx#_msoanchor_21″>[ARP21]Support with facts and figures.

.docx#_msoanchor_22″>[ARP22]Define why it is a good dividend policy.

.docx#_msoanchor_23″>[N23]

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