Merck & Co. Financial Analysis

FINANCIAL ANALYSIS

Merck and Company (MRK)

I. Summary of operations

Merck had a decrease in net sales for 2012 and is currently ranked 5th within the revenue category among related companies. Patent expirations along with the passage of U.S. Legislative Bill HR 3962 (Affordable Care Act) are considered as the main reasons for declining revenue numbers. Merck’s gross margin has held steady at 65% over the last two years while their operating margin has also significantly increased. This increase shows that Merck is taking advantage of all their resources and holding steady with their profits. Merck is ranked 4th within the Working Capital category among related companies after posting a $17,004.33 increased for the past three years, showing that Merck has the ability to maintain a stable financial position by utilizing cash reserves to finance timely corporate acquisitions. The company’s Stockholders equity has shown moderate gains over the past three years. In 2012, it rose by $1 million; which shows that the capital received from its investors in exchange for stocks, donated capital and retained earnings. This also proves that Merck and Co. are financially stable and that it has a strong portfolio. The company’s current ratio has increased each year, at a three year average of 2.09%, which shows the liquidity of Merck and Co. Additionally, the company’s quick ratios has also shown moderate increases of 1.35% within the past three years, which suggests that this company has the ability to pay its debts by utilizing their current assets. Each year there has been an increase on asset return. This shows that the financial management of Merck is using the assets that are given to generate profit for the organization. Lastly, Merck is also able to sell their inventory at an increasing rate while also widening the gap between both the industry and sector median levels. This is a predictor that sales are good, and will continue to have a stable...