1. Financial Ratio Analysis of
Abbott Laboratories
Presented by:
Jincey Jose (A009)
Shraddha Bhatt (A024)

2. Contents
• About ABBOTT Laboratories
• SWOT analysis
• Competitors
• Annual Balance Sheet (2011-2013)
• Financial statement analysis
• Financial ratio analysis
• Conclusion
• Reference

3. About ABBOTT laboratories
• Headquartered in Mumbai
• Founded in 1888, by a young Chicago based
physician, Dr.Wallace Calvin Abbott
• 150 countries
• 35 distribution points, over 4,500 stockists and
150,000 retail outlets
• The current market capitalisation stands at
Rs.3,625.98 crore.
• Sales of Rs.471.81 crore and a Net Profit of Rs
53.46 crore for the quarter ended Dec 2013.

4. The Six Pillars of Abbott
• One Team
• Agile
• Results
• Mutual Respect
• Trust
• Shape the market

5. SWOT Analysis
• Increasing
obsolesce of
technology
• Broad-based
medical
innovation
• Dependent upon
mature products
• Available only in
certain countries.
• Collaborating
with Syngene
• Strong employee
force of 90,000
Strength Weakness
Threat
Opportu-
nities

6. Major Competitors
• Sun Pharma
• Dr Reddy’s Labs
• Cipla
• Lupin
• Ranbaxy Labs

7. Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
ASSETS
Cash And Cash Equivalents 3,475,000,000 10,802,000,000 6,812,820,000
Short Term Investments 4,623,000,000 4,372,000,000 1,284,539,000
Net Receivables 6,514,000,000 10,599,000,000 10,384,460,000
Inventory 2,693,000,000 3,793,000,000 3,284,249,000
Other Current Assets 1,942,000,000 1,757,000,000 2,002,706,000
Total Current Assets 19,247,000,000 31,323,000,000 23,768,774,000
Long Term Investments 119,000,000 274,000,000 378,225,000
Property Plant and Equipment 5,971,000,000 8,063,000,000 7,873,955,000
Goodwill 9,772,000,000 15,774,000,000 15,705,380,000
Intangible Assets 5,735,000,000 8,588,000,000 9,989,636,000
Accumulated Amortization - - -
Other Assets - - -
Deferred Long Term Asset Charges 2,109,000,000 3,213,000,000 2,560,923,000
Total Assets 42,953,000,000 67,235,000,000 60,276,893,000
ANNUAL BALANCE SHEET ( 2011 , 2012 & 2013)

8. LIABILITIES
Accounts Payable 5,948,000,000 10,889,000,000 12,105,473,000
Short/Current Long
Term Debt
3,173,000,000 2,391,000,000 3,374,755,000
Other Current
Liabilities
386,000,000 - -
Total Current Liabilities 9,507,000,000 13,280,000,000 15,480,228,000
Long Term Debt 3,388,000,000 18,085,000,000 12,039,822,000
Other Liabilities 4,791,000,000 9,057,000,000 8,230,698,000
Deferred Long Term
Liability Charges
- - -
Minority Interest 96,000,000 92,000,000 86,312,000
Negative Goodwill - - -
Total Liabilities 17,782,000,000 40,514,000,000 35,837,060,000

9. STOCKHOLDERS' EQUITY
Misc Stocks Options
Warrants
- - -
Redeemable Preferred
Stock
- - -
Preferred Stock - - -
Common Stock 12,048,000,000 11,755,000,000 9,817,134,000
Retained Earnings 21,979,000,000 24,151,000,000 20,907,362,000
Treasury Stock -6,844,000,000 -5,591,000,000 -3,687,478,000
Capital Surplus - - -
Other Stockholder
Equity
-2,012,000,000 -3,594,000,000 -2,597,185,000
Total Stockholder
Equity
25,171,000,000 26,721,000,000 24,439,833,000
Net Tangible Assets 9,664,000,000 2,359,000,000 -1,255,183,000

10. Financial Statement Analysis
• Financial statement analysis is the process of
understanding the risk and profitability of a firm
through analysis of reported financial information,
by using different accounting tools and techniques.
It consists of :-
• 1) reformulating reported financial statements
• 2) analysis and adjustments of measurement errors
• 3) financial ratio analysis on the basis of
reformulated and adjusted financial statements.

11. Financial Ratio Analysis
• Ratio Analysis is a technique of analysis and
interpretation of financial statements. It is
defined as the systematic use of ratios to
interpret the financial statements so that the
strengths and weaknesses of a firm as well as
its historical performances and current financial
condition can be determined.
• Ratios can be expressed as a decimal value,
such as 0.10, or given as an
equivalent percent value, such as 10%.

12. Ratio
Analysis
Liquidity
Ratio
Profitability
Ratio
Turnover
Ratio
Leverage
Ratio
Classification of Ratio Analysis

13. Liquidity Ratio
• It indicates the short-term position of the
organization and also indicates the efficiency with
which the working capital is being used.
Liquidity
Ratio
Current
Ratio
Quick
Ratio

14. Current Ratio
• The current ratio is an indication of a
firm's market liquidity and ability to meet
creditor's demands.
• Current ratio= Current Assets
Current Liabilities
• Standard Ideal value: 2:1

15. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Current
assets
19,247 31,323 23,76
9
22,318 23,314
Current
Liabilities
9,507 13,280 15,48
0
17,262 13,049
Current Ratio Comparison to Industry
Abbott
Laborat
ories
2.02 2.36 1.54 1.29 1.79
Industry
Health
Care
1.69 1.64 1.73 1.7 1.72
Current Ratio

16. Calculation & Interpretation
Year Calculation Ratio Interpretation
2011 23,769 ÷ 15,480 1.54 Unsatisfactory
2012 31323 ÷ 13,280 2.36 Satisfactory
2013 19,247 ÷ 9,507 2.02 Satisfactory
Interpretation:
•As compared to Industry Health Care, the current ratio for years 2012
and 2013 are good.
•A high current ratio indicates that there are sufficient assets available
with the organization, which can be converted in the form of cash and a
low current ratio indicates that a firm may have difficulty meeting current
obligations.
•A too high current ratio signifies the availability of idle cash and
inefficient usage of current assets or short term financing facilities.

17. Quick Ratio
• The Acid-test or quick ratio or liquid
ratio measures the ability of a company to use
its near cash or quick assets to extinguish or retire
its current liabilities immediately.
• Quick Assets = Current Assets – (Inventory +
Prepaid Expenses)
• Quick ratio = Total quick assets ÷ Current liabilities
• Standard Ideal value: - 1:1

18. Quick Ratio
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Selected Financial Data (USD $ in millions)
Cash and cash
equivalents
3,475 10,802 6,813 3,648 8,809
Investments,
primarily bank
time deposits
and U.S. treasury
bills
4,623 4,372 1,285 1,803 1,123
Restricted funds
, primarily U.S.
Treasury Bills.
– – – 1,872 –
Trade receivables
less allowances
3,986 7,613 7,684 7,184 6,542
Total quick
Assets
12,084 22,787 15,781 14,508 16,474
Current liabilities 9,507 13,280 15,480 17,262 13,049
Quick Ratio, Comparison to Industry
Abbott
Laboratories
1.27 1.72 1.02 0.84 1.26
Industry Health
Care
1.19 1.17 1.27 1.21 1.2

19. Calculation and Interpretation
Year Calculation Ratio Interpretation
2011 12,084 ÷ 9,507 1.27 Good
2012 22787 ÷ 13,280 1.72 Good
2013 15781 ÷ 15,480 1.02 Satisfactory
Interpretation:
•As compared to Industry Health Care, the Quick ratio for
years 2011, 2012 & 2013 are good.
•The greater the company's liquidity (i.e., the better able to
meet current obligations using liquid assets) and if less than
1 cannot currently fully pay back its current liabilities.

20. Profitability Ratio
• Profitability ratios measure the company's
ability to generate profitable sales from its
resources (assets).
Profitability
Ratio
Gross
Profit Ratio
Net Profit
Ratio
Operating
Ratio

21. Gross Profit Ratio
• The gross profit ratio indicates the relation
between production cost and sales.
• It measures company's manufacturing and
distribution efficiency during the production
process.
• Gross Profit Ratio = Gross Profit *100
Net Sales

22. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Gross
profit
11,808 24,754 23,311 20,502 17,555
Net sales 21,848 39,874 38,851 35,167 30,765
Gross
profit
margin
ratio
54.05% 62.08% 60.00% 58.30% 57.06%
Gross Profit Ratio

23. Calculation & Interpretation
Year Calculation Ratio
2011 100 × 23,311÷38,851 60%
2012 100 × 24,754÷39,874 62.08%
2013 100 × 11,808 ÷ 21,848 54.05%
Interpretation:
•The gross profit margin improved from 2011 to 2012 but then
deteriorated significantly from 2012 to 2013.
•A high gross profit margin indicates that the company can make a
reasonable profit, as long as it keeps the overhead cost in control.
• A low margin indicates that the business is unable to control its
production cost.

24. Net Profit Ratio
• The net profit ratio indicates that portion
of sales available to the owners after the
consideration of all types of expenses and
costs either operating or non operating or
normal or abnormal
• FORMULAE
Net Profit Ratio = Net Profit after Taxes *100
Net Sales

25. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Net
earnings
2,576 5,963 4,728 4,626 5,746
Net sales 21,848 39,874 38,851 35,167 30,765
Net Profit Margin, Comparison to Industry
Abbott
Laboratorie
s
11.79% 14.95% 12.17% 13.15% 18.68
%
Industry
Health Care
16.84% 15.92% 15.50% 14.38% 20.14
%
Net profit ratio

26. Calculation & Interpretation
Year Calculation Ratio
2011 100 × 4,728 ÷ 38,851 12.17%
2012 100 × 5,963 ÷ 39,874 14.95%
2013 100 × 2,576 ÷ 21,848 11.79%
Interpretation:
•Net profit margin improved from 2011 to 2012 but then
deteriorated significantly from 2012 to 2013.
•The Net Profit Ratio of Abbott Laboratories is less as
compared to the Industry Health Care.
•A high ratio indicates the efficient management of the
affairs of business.

27. Operating Profit Ratio
• This ratio indicates the percentage of net
sales, which is absorbed by the operating
cost.
• This ratio excludes the non-operating
expenses such as administrative expenses ,
selling and distribution expenses.
• Operating Profit Ratio = 100 × Operating
earnings ÷ Net sales

28. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Operating
earnings
2,629 8,085 5,752 6,088 6,236
Net sales 21,848 39,874 38,851 35,167 30,765
Operating Profit Margin, Comparison to Industry
Abbott
Laboratorie
s
12.03% 20.28% 14.81% 17.31% 20.27%
Industry
Health
Care
19.78% 21.20% 21.07% 20.08% 22.02%
Operating Profit Ratio

29. Calculation & Interpretation
Year Calculation Ratio
2011 100 × 5,752 ÷ 38,851 14.81%
2012 100 × 8,085 ÷ 39,874 20.28%
2013 100 × 2,629 ÷ 21,848 12.03%
Interpretation:
•Operating profit margin improved from 2011 to 2012 but then
deteriorated significantly from 2012 to 2013.
•Operating Profit Ratio of years 2011, 2012and 2013 are less than the
Industry Health Care.
• A higher value of operating margin ratio is favourable which indicates
that more proportion of revenue is converted to operating income.

30. TURNOVER GROUP
• Ratios computed under this group indicate the
efficiency of the organization to use the various
kinds of assets by converting them in the form of
sales.
Turnover
Ratio
Inventory
Turnover
Ratio
Working
Capital
Turnover
Ratio

31. Inventory Turnover Ratio
• A ratio showing how many times a company's
inventory is sold and replaced over a period.
• A high inventory turnover ratio indicates that
maximum sales turnover is achieved with the
minimum investment in inventory.
• Inventory or Stock Turnover Ratio
= Cost of Goods Sold
Avg. Inventory

32. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Net sales 21,848 39,874 38,851 35,167 30,765
Inventories 2,693 3,792 3,284 3,189 3,265
Inventory Turnover, Comparison to Industry
Abbott
Laboratories
8.11 10.51 11.83 11.03 9.42
Industry
Health Care
9.43 9.59 10.41 10.36 8.31
Inventory Turnover Ratio:

33. Calculation & Interpretation
Year Calculation Ratio
2011 38,851 ÷ 3,284 11.83
2012 39,874÷ 3,792 10.51
2013 21,848 ÷ 2,693 8.11
Interpretation:
•The ITR of the company declined from year 2011 to 2012 and from
2012 to 2013.
•As compared to the Industry Health Care the Inventory Turnover Ratio
of Abbott Laboratories is good for year 2011 and 2012 and declined in
year 2013.
•A low turnover rate: overstocking or deficiencies in the product line or
marketing effort .
•A high turnover rate: inadequate inventory levels, leading to a loss in
business as the inventory is too low. This often can result in stock
shortages

34. Working Capital Turnover Ratio
• A measurement comparing the depletion of
working capital to the generation of sales over a
given period.
• A high working capital turnover ratio indicates
the capability of the organization to achieve
maximum sales with the minimum investment in
the working capital.
• Working Capital Turnover Ratio= Net Sales
Working Capital

35. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Current
assets
19,247 31,323 23,769 22,318 23,314
Less:
Current
liabilities
9,507 13,280 15,480 17,262 13,049
Working
capital
9,740 18,042 8,289 5,055 10,264
Net sales 21,848 39,874 38,851 35,167 30,765
Working Capital Turnover, Comparison to Industry
Abbott
Laboratorie
s
2.24 2.21 4.69 6.96 3
Industry 3.64 4.07 3.74 3.74 3.38
Working Capital Turnover Ratio

36. Calculation & Interpretation
Interpretation:
• Working capital turnover deteriorated from 2011 to 2012 but then
slightly improved from 2012 to 2013.
• As compared to Industry Health Care working Capital turnover for the
year 2011 is good and less for the years 2012 and 2013.
• A high turnover ratio- management is being extremely efficient in using
a firm's short-term assets and liabilities to support sales.
• A low ratio- business is investing in too many accounts receivable and
inventory assets to support its sales, which could eventually lead to an
excessive amount of bad debts and obsolete inventory.
Year Calculation Ratio
2011 38,851 ÷ 8,289 4.69
2012 39,874 ÷ 18,042 2.21
2013 21,848 ÷ 9,740 2.24

37. Solvency Group
• Ratios computed under this group indicate the
long-term financial prospects of the company.
The shareholders debenture holders and other
lenders of long-term finance/ term loan may be
basically under this group.
Solvency
group
Debt-equity
Ratio
Proprietary
Ratio
Interest
Coverage
Ratio

38. Debt-equity Ratio
• Debt-equity ratio indicates the state of
shareholders or owners in the organization.
• It indicates the cushion available to the creditors
on liquidation of the organization.
• Debt- equity Ratio = Total debt
Total shareholders' equity
• Standard Ideal value: - 2:1

39. Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Short-term borrowings 3,164 2,082 2,348 4,350 4,978
Current portion of long-
term debt
9 309 1,027 2,045 211
Long-term debt,
excluding current
portion
3,388 18,085 12,040 12,524 11,266
Total debt 6,561 20,476 15,415 18,918 16,456
Total Abbott
shareholders'
investment
25,171 26,721 24,440 22,388 22,856
Debt to Equity, Comparison to Industry
Abbott Laboratories1 0.26 0.77 0.63 0.85 0.72
Industry, Health Care 0.46 0.48 0.46 0.43 0.42
Debt-equity Ratio

40. Calculation & Interpretation
Year Calculation Ratio
2011 =15,415 / 24,440 0.63
2012 =20,476 /26,721 0.77
2013 = 6561/25171 0.26
Interpretation:
•Debt-to-equity ratio deteriorated from 2011 to 2012 but then
improved from 2012 to 2013 exceeding 2011 level.
•As compared to Industry Health Care, Debt-to-equity ratio of the
company was good for years 2011 & 2012 and deteriorated for year
2013.
•A low Debt- equity ratio is considered good according to creditors view
as it is secure.
•A high Debt- equity ratio is considered risky according to creditors view
as it gives lesser margin of safety on liquidity of company.

41. Proprietary Ratio
• This ratio indicates the extent to which the
owner funds are sunk in different kinds of
assets.
• The proprietary ratio shows the contribution
of stockholders’ in total capital of the
company.
• Best Ratio considered as 33%
• Proprietary Ratio = Total Shareholders Fund
Total Asset

42. Year 2013 2012 2011
Total Assets 42953 67235 60276
Total Abbott shareholders'
investment
25171 26721 24440
Proprietary Ratio 0.58 0.39 0.40
Proprietary Ratio

43. Calculation & Interpretation
Interpretation:
•The proprietary ratio for Abbott Laboratories improved in 2013 as
compared to 2012 and 2011.
• The higher the ratio dependency on external sources and loans for
working capital will be less and financial condition will be sound.
• A low ratio indicates that the company is already heavily depending on
debts for its operations.
Year Calculation Ratio
2011 24440/ 60276 0.40
2012 26721/ 67235 039
2013 25171/ 42953 0.58

44. Interest Coverage Ratio
• This ratio indicates protection available to the
lenders of long-term capital in the form of funds
available to pay the interest charges i.e. profits.
• It means how easily a company can pay interest
on outstanding debt.
• Interest Coverage = Earning Before Interest& Tax
Ratio Interest expense

45. Interest Coverage Ratio
Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Net earnings 2,576 5,963 4,728 4,626 5,746
Add: Interest
expense
157 592 530 553 520
Add: Income tax
expense (benefit)
138 300 470 1,087 1,448
Earnings before
interest and tax
(EBIT)
2,871 6,855 5,729 6,266 7,713
Interest Coverage, Comparison to Industry
Abbott
Laboratories1
18.29 11.57 10.81 11.33 14.84
Industry, Health
Care
15.43 14.51 15.23 14.01 19.04

46. Calculation & Interpretation
Year Calculation Ratio
2011 5,729/530 10.81
2012 6,855/592 11.57
2013 2,871/157 18.29
Interpretation:
Interest coverage ratio improved from 2011 to 2012 and from 2012 to
2013.
As compared to Industry Health Care Interest Coverage Ratio of
company is good for year 2013 and satisfactory for year 2011 and 2012.
The lower the ratio, the more the company is burdened by debt
expense.
The higher the ratio the more secure the lender is in the payment of
the interest regularly.

47. Conclusion
As per year 2013-
• The current and quick ratios are good.
• The Gross Profit Ratio ,Net Profit Ratio and
Operating Profit Ratio has deteriorated.
• The Inventory Turnover Ratio has declined
while Working Capital Turnover Ratio has
slightly improved.
• The Debt-Equity Ratio, Proprietary Ratio
and Interest Coverage Ratio has improved.

48. Reference
• www.moneycontrol.com
• www.investopedia.com
• www.researchandmarkets.com
• www.abbott.com
• www.abbott.co.in
• A Textbook of Financial Accounting by A. K.
Singhal and H. J. Ghosh Roy