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Any publicly made available knowledge can have serious effects on the future business and financial performance, whether it is a merger, acquisition, a demerger or privatization, to help stakeholders to take a much wiser decision considering different aspects of the company provided in the financial statements, I decided to prepare my research and analysis project on 'Review the financial and business performance of an organization for three years'. I found this topic interesting because during my ACCA tenure and in exam papers I have practice different questions where I have to conduct a complete analysis of the organization, so I m familiar with this topic and knows how to deal with it.
Despite having good profit on books, the company could face the liquidity problems if it did not have enough cash available to run its operation, Business may find it bit difficult to pay its debt and if its continue in the long run then it can be threatening for the going concern status of the company.
Abbott is global broad-based healthcare company devoted to discovering new medicines, new technologies and new ways to manage health. Abbott products span continuum of care, from nutritional product, diagnostics and diabetes care and pharmaceutical therapies. Abbott comprehensive line of products addresses all important health needs from infancy through the golden years.
Abbott mission is to deliver consistently superior products and services which contribute significantly to improve the quality of life of the consumers.
Pharmaceutical Products: Abbott medicines are used to treat some of the world's most serious and prevalent diseases. Abbott also continues to pursue new therapeutic indications for existing medications that offer patients and physicians important treatment options. Some products are,
1. Surbex Z
General Healthcare products: Some products are,
1. Selsun Blue
Diagnostic Products: Abbott products are addressing disease diagnosis, management and treatment monitoring. Being a leader in the In-Vitro Diagnostic Market, Abbott continue to transform the practice of medical diagnostics through innovative products and automated laboratory systems that lower costs and improve patient care. Abbott is the market leader in Immunoassays and is an established reference supplier of infectious disease screening markers. Some products are,
1. Cell-DYN Emerald
Nutritional Products: Abbott has pioneered the nutritional care with its pediatric and medical nutrition ranges. Some products are,
Diabetes Care Products: Abbott Diabetes care is committed to develop products to reduce the discomfort and inconvenience of blood glucose monitoring; introducing systems that are easier to use, require less blood and provide faster results. One of the products are,
1. Optimum Xceed
AIMS AND OBJECTIVES
The aim of the research is to provide an analysis of the last three year position of Abbott Laboratories Pakistan and comment an unbiased opinion on business and financial performance of the company for a period of last three years. For better analysis, the research on Abbott will be compared with GSK to analysis its performance in a better way and with industry as a whole.
The report would be base on the following structure in order to achieve the aims and objectives:
Business Analysis of Abbott
This portion will cover the macro-environmental influences that might affect the Abbott which will be analyzed by using PEST model. The section will also discuss the current position of the company through SWOT analysis, for identifying its strength which can be utilized in a better way, weakness which should be overcome to compete in the market, threat which should be deal with care to be exist in the market and available opportunities which can be utilize for future growth.
Financial Analysis of Abbott
This section will cover the financial analysis of the Abbott which can be done by using relevant accounting techniques and the performance will also be compared with the other company in the industry under the following headings:
_ Operating performance of the company: This section will discuss the operating performance of Abbott. It will include an in-depth analysis of sales, cost of purchase and profitability of the company. It will also examine whether the company has control over its operating expenses which are likely to increase as a company is expanding its operations. Finally the section will end with an overview of the performance of its divisions.
_ Ratio Analysis: Different ratios will be used to analyze and get meaningful information for commenting on the performance. This will involve comparing ratios over last three years to establish whether things are improving or declining and comparing ratios with GSK, the other company in the industry to see whether the performance of the company is worse or better in last three years within its specific business sector. Ratios will be discussed under the following categories.
' Profitability and return
' Long-term solvency and stability
' Short- term solvency and liquidity
' Efficiency (turnover ratios)
The information used for commenting on this research project has been gathered from various sources, most of which are from secondary source, however some information has been taken from in-house magazine and internal reports prepared within the company.
Description and Methods Used For Collection of Information
Different methods have been adopted for information gathering to provide useful analyses of the company which includes:
_ Internal Reports: As mention earlier my short stay in Abbott as an internee provided me with a good opportunity to be able to view some internal reports, these reports helped me to understand reasons behind changes in certain figures in Financial Statement for the three years particularly about sales and profitability of the company.
_ Annual Reports: The annual reports of Abbott Laboratories provided me with much of the information which was needed for the calculation of the key ratios on which my financial analyses is based on. Annual report which consisted of Consolidated Statement of Financial Position; Statement of Comprehensive Income for the 2 years; key ratios along with different graphs; Chairman's Review/ Director's Report helped me to grasp an understanding of the overall performance of the company for the three years. The annual reports of GSK have also provided me with much of the information to compare the performance with Abbott.
_ Newspaper: Different newspapers like Dawn; Business Recorder has kept me updated with essential information for e.g. information regarding current position of the company, upcoming projects and share price movements of both companies in the industry. Relevant articles in different newspapers have also helped me in knowing about the impact on changes on prices of raw material and its impact on Abbott cost and how far is the company being affected in the rapidly changing economic and political situation of the country.
_ Books: Study text of different ACCA papers has also helped me in the preparation of the project. Study text of (P3), Corporate Reporting (P2) and Financial Reporting (F7) gave me a systematic approach to perform and study different strategies and apply ratio analyses.
_ Internet: Internet is the most powerful resource today; I have also utilized this resource as much as possible. Most organization nowadays has their website. Abbott and GSK, both companies have their websites namely www.abbott.com.pk, and www.gsk.com.pk respectively, provided me authentic information regarding company's history, current and proposed projects, economic condition of the company etc. I have also used information presented in other websites as well.
_ Employees of Abbott: During my internship in the company I came across to meet different people working in the company and acquired some valuable information from them regarding the current and past performance of the company. They also helped me to analysis how their system worked and how they manage all project to stay ahead in the industry .
Limitation of Information Gathering
There were few limitations I have to face when gathering the information.. During my internship in the company I gathered a lot of information about the company which was in full detail, so it took a lot of time to actually understand that information and then extract relevant information for my project as much of the information was not relevant for my project. I also had to ensure whatever information acquired from the company's employee is accurate and reliable. Through internet I came across with a lot of information regarding my research from different website but it was not suitable to use that information for the project as it was either irrelevant or not authentic. In order to evaluate the business performance of the company I intend to use more models to give a more comprehensive view of the company but I was unable to use those models just because of the lack of information.
Ethical issues were taken into consideration during the information gathering process. During my internship in Abbott I gathered relevant information for my project but at times it was difficult for me to decide whether I should use the information in my report as disclosing it or it may create a legal and ethical issue.
Accounting and Business Techniques Used
I have used few business models learned during my ACCA studies to provide a systematic view of the financial and business performance of the company which includes:
_ PEST: It is a useful strategic tool to analysis the macro-environment in which the company operates; it breaks the environment down into four main parts which can be expressed as
_ SWOT: SWOT analysis considers factors both internal to the organization and external to the environment. Strength and weakness are discovered by internal appraisal where as opportunities and threats are identified by environmental analyses. The model provides a simple framework for assessing the organization's current position.
_ Ratio Analysis: Ratio analyses helps to determine the financial health of a company. It includes the calculation of different accounting ratios which assist to spot trends in a business and the result than can be compared with successive years and with the other company in the industry. Ratio analyses can used to provide organized analyses of the company's financial position; these ratios are of prime importance to the shareholders, lenders and management. There are certain limitations of ratio analyses such as:
' Financial statement may have been manipulated to give a more favorable view.
' Comparing result between different accounting years may be misleading due to changes in accounting policy
' The ratios are based on the summarized year end information which may not reflect a true picture of the overall year's results.
' Company's operating in the same industry is facing with different financial and business risk; comparing one company with another could provide misleading information.
' Companies do have a different capital structures and comparing one company which is all equity financed and another which is a geared company may not be a good analysis.
' Ratios need to be interpreted carefully because they cannot show whether performance is good or bad.