Executive Summary
Pfizer Company’s financial statement ratios and credit ratings will convince the bank loan managers of the company’s ability to pay the company’s maturing bank loan installments on time. Pfizer Company focuses on selling pharmaceutical products. The research focuses on Pfizer’s liquidity ratios as indicators of Pfizer’s financial health. The research centers on the use of the profitability ratios as determinants of Pfizer’s profitability. The research focuses on the relevance and effect of the credit ratings issued by Standard and Poor and Moody’s as realistic indicators of Pfizer Company’s capacity to pay its installment bank loan obligations on time. The research centers on the use of the audited financial statements for both the 2009 period and the 2010 period are fair evidences of the company financial feasibility. On the other hand, the research should not prioritize the use the unaudited financial statements as basis for bank loan approval. The unaudited financial statements cast doubts as to the fairness of the amounts presented. Both the Pfizer Company’s financial statement ratios and Pfizer’s very positive credit ratings point to the company as having the capacity to comply with the company’s loan payment obligations on time. The Pfizer Company’s financial assessment ratios, financial risk ratios, organizational strategy, business strategy, corporate risk analysis, high credit ratings, and other significant factors vividly indicates the recipient bank must approve Pfizer Company’s bank loan application.
The research recommends the bank loan be approved based on the following conditions:
In terms of recommendations, I do recommend that the bank must approve the Pfizer bank loan. The recommendation is grounded on the following conditions.
- The company must increase its current ratio.
- The company must increase its net liquidity ratio.
- The company should increase its profitability ratio.
The recommendation is based on the following points:
- The financial statement ratios persuade management to approve the loan.
- In terms of strengths, the company has the stability, reliability research and effective development capacity to produce new wonder drugs.
- In terms of weaknesses, Pfizer Company wasted money on unsuccessful drug researches. The liquidity ratios, profitability ratios and high credit ratings convince the bank loan officers to approve the bank loan request.
The company generated profits due the successful maximization of the company’s scarce resources. With the high profits, Pfizer Company can effortlessly pay its maturing bank loan obligations when the installment due dates arrive. Consequently, the bank will be able to collect the total amount (principal) lent to Pfizer Company. The financial analysis portion of the paper proves beyond reasonable doubt that Pfizer Company is a very good bank loan client. Banks generally prefer bank loan clients with a periodic profitable financial analysis trend. With the Pfizer Company’s agreement to increase its current ratio, net liquidity ration, and other relevant ratios, the bank should approve the Pfizer Company’s bank loan.
Organization overview
The company, Pfizer Company, is a global pharmaceutical company focusing on the health and well-being of a person’s entire existence. In terms of financial performance, the company’s revenues had increased by 36 percent during 2010 compared to the prior year. Pfizer’s Enbrel medical product line generated the highest brand increase during 2010 alone. On the other hand, the company’s 2010 income from continuing operations decline by to $8.3 billion when compared to the company’s 2009 income from continuing operations amounting to $8.6 billion.
The company sells high quality products with emphasis on catering to the healthcare needs of the global patient population. The company’s several popular pharmaceutical product lines. The product lines include products that help alleviate ailments of persons under different age groups. For example, the company sells medicines falling under the cardiovascular healthcare products category. Likewise, Pfizer Company the sells medicines falling under the metabolic ailment category. Specifically, the company sells Lipitor, Norvasc, and Caduet healthcare brands. The company also sells products under the central nervous system category. The Pfizer Company products like Geodon to remedy the patients’ discomforts in the central nervous system category. The company also produces health care products under the Diabetes category. The Pfizer Company’s popular diabetes drug is Exubera. Pfizer Company also sells pharmaceutical products under the arthritis category. The Pfizer Company produces Celebrex drug to aid in the rehabilitation of the arthritis patient. Lipitor is one of Pfizer Company’s very popular heart disease medicine. The company also produces Viagra to help a patient’s urology problems.
External analysis “Porter’s Five Forces”
Bargaining power of suppliers. The bargaining power of Pfizer Company’s suppliers can be classified as minimally significant. There are many suppliers edging each other to supply Pfizer Company’s needs. The needs include transportation needs to deliver the Pfizer Company’s products to each global market location, raw material needs, supply needs, and other operating and marketing needs. The abundant list of suppliers advantageously allows Pfizer Company to choose the supplier with the most reasonable supply price. With the abundance of suppliers, Pfizer Company has the prerogative to pick the supplier with the lowest suppliers selling price. Likewise, Pfizer Company can choose the supplier offering the highest supplier price in exchange for the suppliers higher product quality. A third supplier can offer its supply products to Pfizer Company at a price is low enough for the supplier to recover its production costs and cost of marketing the products.
Threat of Substitutes. The threat of substitutes to the Pfizer healthcare product lines is very real. One group of Pfizer substitutes is classified as the over the counter drugs; such drugs do not need the doctor’s prescription. Likewise, generic drugs are significant substitutes to the more expensive Pfizer branded healthcare products. In response, Pfizer sells its own version of generic products to outsell the competitors’ substitute healthcare products. One good example of a substitute threat is a company selling health supplement products to replace the Pfizer Company’s currently being sold.
Threat of new entrants. There are significant threats generated by the new entrants to the Pfizer market segments. Many pharmaceutical companies offer similar medical alternatives to clients currently serviced by Pfizer. The government joins to picture to regulate the playing field among the current and new entrants to the healthcare market segment. Government legislative proposals focus on the government’s participation to the entry of new importers of drugs. The new drugs will be tested to clients currently serviced by the Pfizer Company due the imported medicine’s lower prices. With the advent of information technology, new entrants into Pfizer Company’s current and prospective client markets can easily reach more global clients at minimal advertising. The clients of Pfizer Company can easily find search the internet for similar substitute products in order to persuade the competitors to lower their healthcare product prices.
Intensity of rivalry among instruction competitors. There is intense rivalry among the current players n the pharmaceutical market place. There are more than 400 competitors tightly squeezed in the fully saturated pharmaceutical market. The oversupply of competitors forces each company, including Pfizer Company, to compete for the same current and prospective buyers, resources, and market share. The intense rival precipitates to a price war within the Pfizer Company healthcare market competitors.
Bargaining power of buyers. The decline in the world economy significantly generated a decline in the buyers’ demand for Pfizer products. Many clients seek their government’s aid to ensure the implementation of higher discounts on the Pfizer Company’s healthcare product lines. Many customers seek diverse methods to lower healthcare costs. The government seeks government help to reduce current healthcare prices. Some customers seek their governments’ aid to place price controls on pharmaceutical products.
SWOT Analysis
Strengths. The company’s strengths include the company’s capacity to generate trust among its current and prospect clients. The Pfizer Company gained its trust by being in the global healthcare business for many years. The company’s long profitable history is grounded on selling popular products that successfully alleviate and eradicate ailments The company’s dominance of the diversified global healthcare line includes research, production of medicines and other related products. Particularly, Pfizer Company continues to generate high revenues in many of its biological and small molecule medicines and vaccines.
Weaknesses. The company’s weakness is the low turnout of successful research and development product lines as the high prices of its medical products. Pfizer Company’s Legacy Pfizer product line suffered a three percent decline during 2010 alone. Legacy Pfizer products only generate $1.1 billion during the same year. In addition, the company’s Norvasc and Lipitor product lines generated a decline of $467,000 and $701,000 in revenues during 2010, respectively.
Opportunities. The company’s opportunities include investing on research for new cancer, diabetes and other miracle medicines. Pfizer Company will not swerve from its priority to develop products in emerging markets that include wellness, treatments, and different cures to alleviate or eliminate many of the feared diseases of the current global population. Likewise, Pfizer Company strategically expands its global collaboration efforts to ensure the public’s easy access to reliable and affordable medical products to patients from any part of the world. In addition, pending health care reform legislation (Medicaid) in the United States legislative body will trigger a reduction of Pfizer Company’s gross profits.
Threats. The company’s threats come from the decline in revenues due to the current economic depression enveloping Europe and the decline in profits due from the company’s economic depression of the United States. The company is expecting to feel the revenue decline from the loss or expiration of its intellectual property rights on some of its biopharmaceutical product lines. For example, the company’s exclusive right to sell Lipitor in the United States expires in November 2011.
Corporate level strategy
Pfizer Company’s corporate strategy is focused on increasing its global market share in the pharmaceutical healthcare industry. The strategy includes expanding its research and development activities. The expansion includes selling new wonder drugs that would hasten the alleviation and cure of cancer, diabetes, and other common debilitating ailments. In addition, the company is applying for a bank loan to implement its current corporate level strategy. Management continues to focus on maintaining its strong financial position trend. The trend is characterized by the company’s favorable cash flow performance, availability of financial assets, smooth access to target markets, availability of credit line alternatives and the company’s processing of a bank loan. Once approved, the bank loan will be harnessed to ensure the company’s global production and sales operations will increase Pfizer Company’s share of the global health care market segment.
Business level strategy
During 2009, 2010, and 2011, the company’s business level strategy is to maximize its limited resources increase its global healthcare product line revenues. To full this strategy, the company’s strong marketing activities continue to be instrumental in generating periodic gross profit and net profit trends for 2009 to 2011. The new wonder drugs increase the company’s current revenues. The company’s strategic marketing efforts coupled with management’s client-based production policy successfully catapults Pfizer Company as one of the elite medical marketing firms in the global market place.
Financial Assessment (Key Liquidity Ratios)
Financial statements analysis is based on the company’s financial statement assertions. The liquidity ratios are usually based on the balance sheet accounts. The profitability ratios are normally based on n the income statement figures. Likewise, the statement of cash flows guides the bank loan mangers to approve or disapprove Pfizer Company’s bank loan request.
The banks include the financials statement ratios as yardsticks for the approval or disapproval of Pfizer Company’s bank loan application. The banks scrutinize the financial statements for signs of Pfizer’s profitability. A company that generates profits is classified as financially viable. Profitable companies have the capacity to pay their maturing obligations on time. A company that generates a trend of net income figures during the company’s prior accounting periods will generally get the bank managers’ loan disapproval.
For the year 2010, the above financial statement analysis’ current ratio shows the company’s current assets of $60,468 is 2.11 times higher than the company’s current liabilities of $28,609. The ratio indicates the company has enough current assets to pay its currently maturing current liabilities during the year. For the year 2009, Pfizer Company’s current ratio analysis shows the company’s current assets portion amounting to $61,607 is 1.66 times higher than the company’s $37,225 current liabilities portion. The financial statement ratio indicates the company has enough current assets available for the payment of its currently maturing current liabilities during the year. Comparing the two accounting audited financial statements’ accounting periods, the year 2010 current ratio of 2.11 shows a better financial statement liquidity performance compared to the lower 1.66 current ratio financial statement performance for the year 2009. In terms of clarification, the company’s current assets portion of the financial statements is composed of cash, cash equivalents, short term investments, accounts receivable, short term loans, inventories, taxes, other current assets and assets held for sale during 2010 and 2009. The company’s current liabilities portion of the financial statements include the company’s short term borrowings, accounts payable, dividends payable, income taxes payable, accrued compensation, related items, and other current liabilities1.
The next table shows the year 2010, the Pfizer Company’s financial statement analysis (quick ratio) is composed of the company’s $42,624 quick assets is 1.49 times higher than the company’s current liabilities of $28,609. This proves that the company has more than enough quick assets to pay its currently maturing current liabilities during the year. For the year 2009, the above financial statement analysis indicates the
Company’s quick ratio shows the company’s current assets of $40,614 is 1.09 times higher than the company’s current liabilities of $37,225. The comparison shows the company has enough current assets available to pay the company’s currently maturing current liabilities within the same year. Comparing the audited financial statements of 2009 and 2010, 2010 is financially better than 2009 because the 2010’s quick ratio of 1.49 is higher than the 2009 financial statement liquidity performance (quick ratio) of 1.09. In terms of clarification, the company’s quick assets are composed of cash, cash equivalents, short term investments, and accounts receivable2.
Based on the table below, the year 2010 indicates the Pfizer Company’s financial statement analysis (cash ratio) is composed of the company’s current assets consists of cash, cash equivalents, and marketable securities amounting to only $28,012.
The amount is only 0.98 times the company’s current liabilities. The higher liabilities amount is $28,609. The financial statement ratio shows the company does not have enough current assets available to pay Pfizer’s currently maturing current liabilities during the year. For the year 2009, the above financial statement analysis shows the company’s $25,969 cash amount is composed of current assets consisting of cash, cash equivalents, and marketable securities. The cash ratio is only 0.70 times the company’s current liabilities amounting to $37,225. The financial statement ratio indicates the company does not have enough current assets available for the payment of the company’s currently maturing current liabilities. Comparing the two accounting periods’ audited financial statements, the 0.08 2010 cash ratio shows a better financial statement liquidity performance compared to Pfizer Company’s lower 2009 cash ratio of only 0.70 cash ratio3.
For the year 2010, the above financial statement analysis shows Pfizer Company’s cash to current assets ratio includes the company’s $28,012 current assets amount consisting of cash, cash equivalents, and marketable securities. The cash figure is only 0.46 of Pfizer Company’s $60,468 total current assets amount. The financial statement ratio indicates the company does not have enough assets available to pay the company’s currently maturing current liabilities during the year. Likewise, for the year 2009, the above financial statement analysis (cash ratio) shows that the company’s $25,969 current assets amount consists of cash, cash equivalents, and marketable securities. The amounting is 0.42 times the company’s $37,225 total current assets figure. The financial statement ratio shows the company does not have enough current assets available for the payment of Pfizer Company’s currently maturing current liabilities. Comparing the two accounting period’s audited financial statements, the year 2010 cash to current assets ratio of 0.46 is a better financial statement liquidity performance ratio compared to the lower 0.42 cash to current ratio financial statement performance during 2009.
For the year 2010, the above financial statement analysis indicates the company’s cash flow ratio shows that the company’s operating cash flow amounts to only $11,454. The amount is only 0.40 times the company’s total current liabilities amounting to $28,609. The financial statement ratio shows the company does not have enough operating cash flows available for the payment of the company’s currently maturing current liabilities. For the year 2009, the above financial statement analysis’ cash flow ratio shows the company’s operating cash flow amounts to only $16,587. The figure is only 0.45 of the company’s $37,225 total current liabilities amount. The ratio shows the Pfizer Company does not have enough operating cash flow available for the payment of Pfizer’s currently maturing current liabilities during the same year. Comparing the two accounting periods’ audited financial statements, the year 2009 cash flow ratio amounting to 0.45 shows a better financial statement liquidity performance compared to the lower 0.40 cash flow ratio financial statement performance during the succeeding year, 2010.
For the year 2010, the above financial statement analysis shows the company’s total debt to total equity ratio includes the company’s total debt amounting to only $106,749. The figure is 1.21 times the company’s total equity amounting to $88,265. The shows the company’s total debt figure is higher than the company’s total equity amount. For the year 2009, the above financial statement analysis shows the company’s total debt to total equity ratio. The ratio indicates the company’s total debt amounts to only $122,503. The figure is 1.35 times the company’s total equity amounting to $90,446. The ratio indicates the company’s total debt is higher than the company’s total equity. The best debt to equity ratio is defined as a one to one relationship. Thus, the company must generate loan amounts equal to the amount invested by the stockholders of Pfizer Company. Comparing the two accounting periods’ audited financial statements, the year 2010 debt to equity ratio of 1.21 is financially better because the 2010 financial statement liquidity performance ratio is lower when compared to the 1.35 debt to equity ratio for the year 2009.
The Pfizer Company’s preference for bank loans is understandable. The company may not prefer to generate cash inflows from offering new shares of stocks. The shares of stocks are generally issued to current stockholders and future stockholders. In turn, the current stockholders and future stockholders will automatically become shareholders of Pfizer Company. The owners’ share in the company is arrived at by dividing each stockholder’s own share by the total number of shares being offered to both the current investors and future investors. In turn, the current shareholders as and future shareholders prefer to invest their funds in the company with the intention of generating dividend income. Dividends are arrived at by dividing the company’s annual net income amount by the total number of outstanding common stocks. In terms of prioritizing dividend payments, Pfizer Company must prioritize the payment of the preferred shares’ dividend income. After the preferred shareholders of Pfizer Company are paid, the excess dividend amount is distributed to the owners of common stocks.
Further, the company may not offer new shares of stocks to both the current shareholders and prospective shareholders to avoid the disruption of the current dividend income distribution ratios. The investor with a larger number of stock shares will receive higher dividend income amounts compared to investors having a fewer number of stock share. This is understandable because the Pfizer Company shareholders having the larger number of stock shares invest the higher amount of cash and other cash equivalents compared to investors of lesser stock shares. Consequently, the Pfizer Company’s possible future loss or bankruptcy will have more financial drain on the shareholders owning higher number of stock shares compared to the financial drain the Pfizer investors having lesser cash and cash equivalent investments will suffer.
For clarity, the Pfizer Company needs funds to pay for the processing and selling of its pharmaceutical products. Pfizer Company prefers to generate new cash inflows through bank loans. In turn, the bank earns interest from lending money to clients, including Pfizer Company. The bank takes a calculated risk when it approves the bank loans. Pfizer Company uses the bank loans to defray the company’s daily operating expenses. The operations include research, development, manufacture and sales of new drugs. Currently, some of the company’s new drug researches include finding cures to cancer and other debilitating ailments.
Corporate Forecast
Based on the company’s prior and current year’s financial statement trends, Pfizer Company will continue to globally grow financially bigger during the next five years. The Pfizer Company’s continuing success in the research and development of new wonder drugs ensures Pfizer Company’s sales will increase. Consequently, the Pfizer Company’s net profits will increase. The increase in Pfizer Company’s sales figures will precipitate to the increase in the company’s global production and marketing costs. Lastly, the Pfizer Company will venture into other pharmaceutical markets with the introduction of new wonder drugs.
Risk Assessment (Key Profitability Ratios)
In terms of other issues to be taken up, the current economic depression increases Pfizer Company’s efforts to harness its resources to increase its annual revenues from the 2010 actual figures. The company’s research on drugs is a costly gamble because some drugs were classified as failures; the corresponding research funds cannot be recovered.
Further, risk assessment shows that the profitability ratio is a very important issue. The profitability ratios aid in the approval or disapproval of Pfizer Company’s bank loan application. Based on both the profitability ratios and liquidity ratios, Pfizer Company is financially solvent (able to pay its debts on time). The solvency issue shows that the bank will have a low risk of the Pfizer Company’s failure to pay its maturing obligations on time. Normally, the bank has more risks if the bank’s prospective company generates a net loss trend for the past few years of operations. The Pfizer Company’s high profitability ratios indicate the bank stands little risk of the Pfizer’s inability to pay its maturing long term bank obligations on time.
Further, solvency shows the Pfizer Company’s financial statements vividly indicate Pfizer Company has the financial capacity to generate more than enough revenues to pay the Pfizer Company’s maturing long term as well as short term debts. The profitability ratios show convincing evidences of Pfizer Company’s successfully execution of its corporate and business level strategies. The profitability ratios clearly show that Pfizer Company is well entrenched in a stable pharmaceutical market segment. Consequently, there is no evidence to prove Pfizer Company’s current and future market segment is unstable.
The company’s profitability ratio significantly influences the company’s liquidity ratios. Under the going concern theory of accounting, the profitability ratios will show whether it is feasible to continue Pfizer’s current business operations. A profit-lacking business operation triggers a decline in the liquidity ratios because of the reduction of cash inflows. The reduction precipitates from declining profits or a net loss predicament4.
Based on the table below, the year 2010 indicates that the above financial statement analysis (profit ratio) shows that Pfizer Company’s net income from operations is $8,289. The net income is 12 percent of the company’s net sales figure amounting to $67,809. For the year 2009, the above financial statement analysis’ profit ratio shows Pfizer Company’s net income from the pharmaceutical company’s operations is $8,644. The net income is 17 percent of the company’s net sales figure amounting to $50,009. The financial statement ratio shows the company did profitably well during the two accounting periods. Comparing the two accounting periods, the company’s 2009 operations, with a profit margin of 17 percent, performed financially better when compared to Pfizer’s 2010 operations’ profit ratio of only 12 percent.
For the year 2010, the above financial statement analysis (net operating income to sales ratio) shows the company’s earnings before interest expense and taxes is $9,422. The $9,422 amount is 14 percent of the company’s $67,809 net sales.
For the year 2009, the above financial statement analysis (net operating income to sales ratio) shows the company’s earnings before interest expense and taxes is $10,827. The figure is only 22 percent of the company’s $50,009 net sales. The financial statement ratio shows the company did profitably well during the two accounting periods. Comparing the two accounting periods, the company’s 2009 operations’ 22 percent net earnings before interest expense and taxes ratio is better than the Pfizer Company’s 2010 operations because the 2010 operations generated a lower 14 percent net operating income before interest expense and taxes ratio.
For the year 2010, the above financial statement analysis (return on investment) shows the Pfizer Company’s $8,289 net income is 4 percent of the company’s $203,981 average total assets amounting. For the year 2009, the above financial statement analysis computation (return on investment) shows the company’s $8644 net income amount is 4 percent of the company’s average total assets amounting to $212,949. comparing the two accounting periods, both 2009 and 2010 have similar return on investment results5.
In addition, the bank manager can used the credit ratings issue as a basis for approving or disapproving Pfizer Company’s bank loan application. Moody’s, a very respectable credit rating agency, gave the Pfizer Company an A1 credit rating. The rating represents the company’s ability to pay its long term debts on time. The same company classifies Pfizer Company as a stable company. Another very reliable credit rating agency, Standard and Poor, gave Pfizer Company an AA credit rating. Likewise, the Standard and Poor credit rating agency classified Pfizer Company as a stable company. Both credit rating agencies gave positive ratings that will persuade the bank managers to immediately approve Pfizer Company’s bank loan application.
Banks generally generate interest income from bank loan lending. The bank collects the principal and interest income amounts from the company on an installment basis. The bank collection is not grounded on whether Pfizer Company generating net profits during the year. However, the bank may lose its invested cash and cash equivalents if Pfizer Company generates a net loss. Pfizer may not be able to pay its loans on time if the company continues to generate net loss figures. The banks favoring bank loans over investment in stocks is very understandable. The bank collects both the principal amount plus interest income. The borrowing company’s profitability issues influence the bank’s approval of bank loan.
When investing in stocks, the banks may or may not receive dividends from the invested company’s business operations. In terms of mercy, the banks will not be able to generate cash dividends if the invested company generates a net loss. To avoid this debacle, the banks continue researches on alternative profitable investments. The banks will generally refuse to honor unaudited financial statements as grounds for the approval of Pfizer Company’s banks loan application.
The reason is clear. The unaudited financial statements are prepared by the company’s biased accountant. In this case, Pfizer’s accountant prepares the company’s balance sheet, income statement, and statement of cash flows of the company. There is a big probability the financial statements are erroneously or fraudulently prepared by the Pfizer Company accountant. The Pfizer Company accountant could manipulate the recording of journal entries to erroneously or fraudulently present false financial statement assertions. The Pfizer Company managers can fraudulently instruct the company accountant to prepare unfair financial statement entries. The financial statement entries prove Pfizer Company performed financially well during 2009, 2011, and 2011. The Pfizer Company’s officers may force the Pfizer accountant to fraudulently increase the company’s sales figure into order to present higher profits.
In accounting parlance, this is known as window dressing. Under the window dressing principle, the financial statements are the windows of Pfizer Company. Some stores often display their best selling products on the display window in order to attract prospective buyers of the store’s displayed products and services. Once inside the Pfizer Company’s stores, the clients are persuaded to buy the company’s hidden products and services. There is a strong probability Pfizer Company’s financial statements are fraudulently window dressed. Consequently, the fraudulent financial statements convince the bank managers to approve Pfizer Company’s bank loan request.
Consequently, the Pfizer Company’s unaudited 2011 financial statements should be audited by the external auditor. Audited financial statements show the fairness of the financial statements. The external auditor expresses a professional opinion on Pfizer Company’s ability to pay its current and future maturing loans. Upon seeing some financial statement errors and fraudulent entries, the external auditor makes corrective recommendations.
In terms of analysis, it is right for the Pfizer Company to present its financial statements for the year 2009, 2010 and 2011 as basis for the approval of the company’s bank loan application. The Pfizer Company’s liquidity ratios show a favorable picture of the company. The favorable picture is the company’s ability to pay its loan amortizations. The Pfizer Company is right in presenting the profitability ratios and liquidity ratios as proof of the company’s financial capacity to pay Pfizer Company’s maturing bank loan liabilities. In addition, the company is right in presenting its very high credit ratings as proof if its ability to pay its bank loan accountabilities. Pfizer Company’s high credit ratings prove the company has the unquestionable capacity to pay both its current and future bank loan amortizations.
Recommendations
In terms of recommendations, I do recommend that the bank must approve the Pfizer bank loan. The recommendation is grounded on the following conditions.
- The company must increase its current ratio.
- The company must increase its net liquidity ratio.
- The company should increase its profitability ratio.
The recommendation is based on the following points:
- The financial statement ratios persuade management to approve the loan.
- In terms of strengths, the company has the stability, reliability research and effective development capacity to produce new wonder drugs.
- In terms of weaknesses, Pfizer Company wasted money on unsuccessful drug researches. The liquidity ratios, profitability ratios and high credit ratings convince the bank loan officers to approve the bank loan request.
Conclusion
Based on the above discussion, Pfizer Company’s financial statements ratios and credit ratings persuade the bank managers to approve Pfizer’s bank loan application. The liquidity ratios indicate that the company is a good loan client. The profitability ratios indicate the company can profitably pay its maturing debts. The credit ratings show the company will be able to pay its maturing obligations on time. The credit ratings of Moody’s and Standard and Poor similarly depict Pfizer Company as an enterprise willing to pay its obligations. The company’s level of debt can be increased because the financial statement ratios show strong evidences of Pfizer Company’s ability to pay the new bank loan on time. The audited financial statements for the year 2009 and 2010 are fair evidences of the company’s feasibility and ability to comply with its contracts. On the other hand, the unaudited financial statements are very unreliable evidences of the company’s ability to pay its bank loan obligations. Based on the SWOT analysis, Porter’s Fiver Forces, financial ratios and other factors, it is highly recommended that the recipient bank should approve Pfizer Company’s bank loan application. Indeed, the Pfizer Company’s financial assessment ratios, financial risk ratios, organizational strategy, business strategy, corporate risk analysis and high credit ratings precipitates to the approval of Pfizer Company’s bank loan approval.
Bibliography
Fabozzi, Frank and Patterson, Pamela. Analysis of Financial Statements. New York: J. Wiley & Sons Press,1999.
Feldman, Matan and Arkady, Libman. Crash Course in Accounting and Financial Statement Analysis. New York: J. Wiley & Sons Press, 2011.
Maguire, Marion. Financial Statement Analysis. New York: Grin Press, 2007.
Pratt, Jamie. Financial Accounting in an Economic Context. New York: J. Wiley & Sons Press, 2010.
Wahlen, James. Financial Reporting, Financial Statement Analysis, and Valuation: Strategic Perspective. New York: Cengage Press, 2010.
Footnotes
- Marion Maguire, Financial Statement Analysis. (New York: Grin Press, 2007), 7, Web.
- Fabozzi, Frank, Pamela Peterson, Analysis of Financial Statements. (Ne York: J. Wiley & Sons Press, 2010), 87, Web.
- James Wahlen, Financial Reporting, Financial Statement Analysis, and Valuation. (New York: Cengage Press, 2010), 361, Web.
- Matan Feldman and Arkady, Libman, Crash Course in Accounting and Financial Statement Analysis (New York: J. Wiley & Sons Press, 2011), 259, Web.
- Jamie Pratt, Financial Accounting in an Economic Context (New York: J. Wiley & Sons Press, 2010), 181, Web.