Chapter 1

Introduction

It is a global, broad-based health care company devoted to discovering new medicines, new technologies
and new ways to manage health. Their products span the continuum of care, from nutritional products and
laboratory diagnostics through medical devices and pharmaceutical therapies. their comprehensive line of
products encircles life itself – addressing important health needs from infancy to the golden years.
With over 70,000 employees worldwide and a global presence in more than 130 countries, Abbott is
committed to improving people's lives by providing cost effective health care products and services that
consistently meet the needs of our customers.
Abbott Pakistan is part of the global healthcare corporation of Abbott Laboratories, Chicago, USA.
Abbott started operations in Pakistan as a marketing affiliate in 1948; the company has steadily expanded
to comprise a work force of over 1500 employees. Currently two manufacturing facilities located at
Landhi and Korangi in Karachi continue to use innovative technology to produce top quality
pharmaceutical products.
Vision
To be a premier healthcare company in Pakistan.

Mission
To deliver consistently superior products and services which contribute significantly to improve the
quality of life of the consumers.

Products:
1. Nutritional Products:
Ensure, Ensure Plus, Glucerna RTF, Glucerna SR, Pedialyte, Pediasure
2. Pharmaceutical Products
Abocain, Abocal, Acyclovir, Arinac, Becefol, Bejectal, Bevidox, Brufen, Burnol, Cecon, Cofcol,
Citro Soda, Cremaffin, Dayalets, Daycor, Dijex, Enoxabid, Entamizole, Epival.

Listing year in Stock Exchange:

1948
Corporate Governance:
Performance Evaluation of the Board
The Board of Directors act as governing trustees of the Company on behalf of the shareholders while
carrying out the Company's mission and goals. The Board of Directors set following evaluation criteria to
judge its performance.
1. Compliance with the legislative system in which Abbott Pakistan operates, particularly
Companies Ordinance, 1984, listing regulation of Stock Exchanges, and the Memorandum and
Articles of Association of the Company.
2. Review of the strategic plans, business risks and monitoring Company's performance against the
planned objectives and advice the management on strategic initiatives.
3. Establishing adequate internal control system in the Company and its regular assessment through
self assessment mechanism and internal audit activities.
4. Ensuring required quorum of Board meeting is available, in order to have detailed deliberation
and quality decision on matters of significance.
5. Ensuring training of Board of Directors including new appointments such that each member is
fully aware of his roles and responsibilities.
Performance evaluation of the Chief Executive
The Chief Executive Officer, being part of the Board, is present in every meeting of the Board. The CEO
provides overview of the performance of Company to the Board and addresses any specific questions by
the Board members.
The performance of CEO is assessed through the evaluation system set by the Abbott Pakistan. The
principle factors of evaluation include financial performance, business process, compliance, business
excellence and people management.
 Chapter 2
Year of Analysis:
2010, 2011, 2012

Source of Data:

http://www.abbott.com.pk/

Ratios and Interpretation

Name Formula Ratios
Activity Ratios 2010 2011 2012
Inventory Turnover ratio CGS/Avg inventory 114.6 54.75 62.68
Avg inventory retention period 360/Inventory turnover ratio 3.14 6.575176 5.743584
Receivable turnover ratio sales/avg receivables 8.78 243.648 188.3992
Avg collection period 360/receivable turnover ratio 40.99 1.477541 1.910836
Payable turnover ratio purchases/avg payables 0.98 5.047751 5.408581
Avg payment period 360/payable turnover ratio 368.6 71.3189 66.5609
Asset turnover ratio sales/total assets 1.90 1.748331 1.630919
avg inventory retention period+avg
Working capital cycle collection period 44.13 8.052717 7.65442
cash cycle working capital cycle-avg payment period -324.47 -63.2662 -58.9065
Here in 2012 the selling staff become efficient as compared to 2011 but less efficient than 2010. It
seems that company is selling its product on credit bases. The collection department is efficient as
compare to 2011 but not too much efficient as compared to 2010 and it seems that company may tide
its credit policy in 2012. The company has good financial position and can easily pay its debt.
Liquidity Ratios
Current ratio Current assets/current liabilities 2.19 2.422561 2.707606
Quick ratio (current assets-inventory)/current liabilities 2.13 2.348927 2.645219
(cash + marketable securities)/current
cash ratio liabilities 0.93 1 2.293723
cash flow from operations cash flow from operations/current liabilities 0.52 0.863164 1.031564
defensive interval (Quick assets/projected expanses)*100 #DIV/0! #DIV/0! #DIV/0!
The company can easily pay its current liabilities and company has more resources than its need. As
compare to previous year the company has loosed the ability to pay it liability. The company is
loosing the ability to pay its immediate liability day by day & it seems the managers have aggressive
approach or company have week position in the market. The company can pay its liability through its
operations & it has competitive edge. The projected expenses were not available so it is difficult to
comment about defensive interval.
 Long term solvency ratios
Debt to total asset ratio total debt/total assets 0.32 0.05561 0.060744
Debt to capital employed ratio total debt/total capital employed 32.46179 5.496997 5.866386
Equity to total assets Total equity/total debt 2.08 12.59354 11.83517
Debt to Equity ratio total debt/total equity 0.48 0.079406 0.079406
Interest coverage ratio EBIT/interest 7.36 8.200819 10.32451
cash flow from operation/current portion
Debt servicing ratio from long term debt #DIV/0! #DIV/0! #DIV/0!
The 60% of the total assets of the company are on debt & 40% are on cash or equity. The company is
less risky for investment. The company can easily pay interest on debt. The current portion from long
term debt was not available se it is difficult to comment on debt servicing ratio.
Profitability Ratios 2010 2011 2012
Gross profit ratio Gross profit/sales 0.34 0.36043 0.374785
Operating margin EBIT/sales 0.16 0.183427 0.198087
Net profit ratio net profit/sales 0.11 0.127025 0.137359
Net profit margin net profit/sales 0.11 0.127025 0.137359
Earning per share net profit/total shares 0.006 1.679858 2.134922
Dividend per share total dividend/total shares 0.002 0.6 0.7
dividend payout ratio proposed dividend/net profit 0.0002 0.357173 0.327881
dividend percentage total dividend/share capital 0.002 0.002937 0.003427
Return on capital employed EBIT/capital employed 30.10004 31.69985 31.19999
EBIT/(total assets+working
Return on capital employed capital) 0.28 0.303467 0.311666
Return on equity Net profit/Total equity 0.30 0.317109 0.311611
The company is producing more efficiently day by day or it seems the company is charging high price
or give better credit terms. The company is sending more on advertising & administrative expanses.
The company is improving day by day and reducing its cost & increasing the net profit. The company
day by day increasing its shareholders wealth. The company is increasing the dividend year by year it
means company has fewer projects for future. Company is giving 35% of its profit to shareholders.
The company’s operations become more efficient than previous year.
Market based ratios 2010 2011 2012
book value per share/market value
Market to book ratio per share 0.36 0.530815 0.298519
book value Equity/number of shares 0.02 5.297413 6.85125
price earning ratio Market price/Earning per share 0.83 5.939881 10.74941
Earning yield ratio Earning per share/Market price 1.20 0.168354 0.093028
Dividend yield ratio Dividend per share/Market price 0.00025 0.006013 0.00305

The company is less risky in 2012 than 2011.