Escolar Documentos
Profissional Documentos
Cultura Documentos
1999
4,06
89,90
6,30
57,94
5,51
66
3,70
0,64
LIQUIDITY ANALYSIS
Avg.no.days inventory in stock
(plus) Days of receivable outstanding
Length of operating cycle
(minus) Payables outstanding
Length of cash cycle
Current ratio
Quick ratio
Cash ratio
Cash from operations ratio
Defensive interval no.of days
Projected Expenditure
SOLVENCY ANALYSIS
Short-term debt
Long-term debt
Total debt
Trade payables
Total debt (including trade)
Total equity
Total capital
Total capital (including trade)
Debt To equity
Debt To capital
Debt (including trade) To equity
Debt (including trade) To capital
Times interest earned
Capital expenditure ratio
CFO to debt
Unit
Times
Days
Times
Days
Times
Days
Times
Times
1999
89,96
57,93
147,89
66
82
3,26
2,73
1,93
0,37
417,28
669.772
1999
11.480
9.858
21.338
130.129
151.467
907.373
928.711
1.058.840
0,02
0,02
0,17
0,14
134,30
3,77
4,92
Unit
days
days
days
days
days
times
times
times
times
days
JPY
Unit
JPY
JPY
JPY
JPY
JPY
JPY
JPY
JPY
times
times
times
times
times
times
times
PROFITABILITY ANALYSIS
Gross margin
Operating margin
Pretax margin
Profit margin
ROA (preinterest)
After tax
Pretax
ROE
After tax
Pretax
ROTC (preinterest)
After tax
Pretax
1999
48,41%
16,84%
21,56%
10,86%
7,04%
10,84%
10,57%
20,97%
10,24%
15,78%
TAKEDA
1999
4,06
89,90
6,3
58
5,5
66
3,70
0,64
PFIZER
1999
1,45
251
4,78
76
2,45
149
3,32
0,83
Unit
X
days
X
days
X
days
X
X
TAKEDA
1999
89,96
57,93
147,89
66
82
3,26
2,73
1,93
0,37
417,28
PFIZER
1999
251
76
328
149
179
1,22
0,9
0,48
0,33
273
Unit
days
days
days
days
days
X
X
X
X
days
SOLVENCY ANALYSIS
Short-term debt
Long-term debt
Total debt
Trade payables
Total debt (including trade)
Total equity
Total capital
Total capital (including trade)
Debt To equity
Debt To capital
Debt (including trade) To equity
Debt (including trade) To capital
Times interest earned
Capital expenditure ratio
CFO to debt
TAKEDA
1999
11.480
9.858
21.338
118.852
140.190
907.373
928.711
1.047.563
0,02
0,02
0,15
0,13
172,99
3,77
4,91
Unit
Yen
Yen
Yen
Yen
Yen
Yen
Yen
Yen
X
X
X
X
X
X
X
PFIZER
1999
5.001
525
5.526
1.820
7.346
8.887
14.413
16.233
0,62
0,38
0,83
0,45
19,83
2,06
0,56
Unit
USD
USD
USD
USD
USD
USD
USD
USD
X
X
X
X
X
X
X
TAKEDA
1999
48,41
16,84
21,56
10,86
7,04
10,84
10,57
20,97
10,24
15,78
PFIZER
1999
84,4
28,88
27,42
19,74
17,33
24,07
36,15
50,21
25,45
35,34
Unit
%
%
%
%
%
%
%
%
%
%
0,64 =
10,84% -
0,08% =
10,76% X
1,51 =
16,26%
ROA measures the return to all capital providers (creditor & shareholder) and is calculated on
pre-interest basis. This calculation uses Earning before interest & tax (EBIT) to calculate the
ratio.
ROE measures return to the firms shareholder and is calculated after deducting the returns
paid to creditors (interest), therefore the ROE is calculated in post-interest basis. This
calculation uses Earning before tax (EBT) to calculate the ratio.
DISAGGREGATION OF ROE (AFTER TAX) 1999
A.Three-Component Disaggregation of ROE
(Profitability X Turnover)
Net Income
Sales
Sales
X Average =
Total Assets
10,86% X
Taxes
Financing
Net Income
EBT
EBT
X
EBIT
X
0,50 X
0,99 X
0,64 =
10,86% X
0,64 =
Net Income
Average
Total Assets
X
Solvency
=
ROE
Average Total Assets
Net Income
X
Average
=
Average
Common Equity
Common Equity
7,00% X
X
Net Income
Average
Total Assets
1,51 =
Solvency
10,57%
ROE
7,00% X
1,51 =
Three-component disaggregation of ROE is breaking down the ROE into three categories:
Profitability : measured by Profit Margin.
Activity : measured by Asset Turnover.
Solvency : measured by Financial Leverage.
Profit Margin could also be broken down to see the effect on profit from the following:
Tax effect : measured by comparing Net Income to pre-tax earning (EBT).
Financing (interest) effect : measured by comparing EBT to earning before interest &
tax (EBIT).
Operation effect : measured by comparing EBIT to total Sales.
The resulting calculation of after-tax ROE is 10.57% compared to 16.26% before-tax.
4. Comparison of 1999 after-tax ROE between Pfizer and Takeda shows that Pfizer has higher
ROE (36.15%) than Takeda (10.57%). This big difference can be examined by further
comparison of three-component disaggregation of ROE as follows:
10,57%
Net Income
Average
Total Assets
X
Solvency
=
ROE
Average Total Assets Net Income
X
Average
=
Average
Common Equity
Common Equity
7,00% X
1,51 =
10,57%
16,46% X
(0,09)
2,2 =
(0,69)
36,15%
(0,26)
Difference between ROE for Pfizer and Takeda lies on profitability ratios (net income/sales),
which comes from effects of taxes and operations.
Other factor that diffirentiate those firms is the composition of Cost Of Good Sold to Sales
(using common size balance sheet).
5. (i) Changes in Roches ROE from 1999 to 2000
Five-Component Disaggregation of ROE
(Profitability X Turnover)
Effects of:
Financing
EBT
EBIT
0,76
2000
0,91
Difference
20%
1999
Taxes
Net Income
EBT
Operations
EBIT
Sales
1,18
23,29%
1,33
24,87%
13%
7%
Net Income
Sales
ROE
Sales
Average
Total Assets
20,91%
0,44
9,13%
2,60
23,71%
30,16%
44%
0,41
12,36%
35%
2,57
31,70%
-6%
Net Income
Average
Total Assets
Solvency
Net Income
Average
Common Equity
-1%
34%
The key Ratio: Profitability Ratio (Sales/ Avereage Total Assets) shows the largest difference
that can make significant difference on ROE, which is caused by the effect of Taxes, while
Turnover Ratio and Solvency Ratio remains stable.
(ii) Difference between the 1999 ROE for Pfizer and Roche
Five-Component Disaggregation of ROE
(Profitability X Turnover)
Effects of:
ROCHE
1999
PFIZER
1999
Difference:
Taxes
Net Income
EBT
0,76
0,72 X
-0,04
Financing
EBT
EBIT
1,18
0,95 X
-0,23
Operations
EBIT
Sales
23,29%
28,88%
0,06
Net Income
Sales
Sales
Average
Total Assets
20,91%
0,44
9,13%
19,74%
0,83
16,46%
-0,01
0,39
Net Income
Average
Total Assets
0,07
Solvency
ROE
Net Income
Average
Common Equity
2,60
23,71%
2,2
36,15%
-0,40
Key Ratio:
Difference between ROE for Pfizer and Roche lies on asset turnover, which describe asset
management of Pfizer is better than Roche.
0,12