Balance sheet

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Income statement
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Statement of cash flows

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Ratios
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Balance sheet
On what date is the balance sheet prepared?
Verify that A = L + SE
Prepare a common-size balance sheet for two years.
What are major assets of this company?
What are major liabilities of this company?
Perform comparative balance sheet analysis and identify major changes
What proportion of total assets are funded by shareholders and what proportion is funded by lenders & non-
owners?
What proportion of assets can be converted into cash with one year?
What proportion of liabilities must be repaid within one year?

Income statement
For what period is the income statement prepared?
Prepare a common-size income statement for two years.
What are the major expense of this company?
Perform comparative income statement analysis and identify major changes
For every sale of $100 how much is the net income generated by this company?
Calculate the EBIT and EBITDA for this company

Statement of cash flows

Verify that Beginning cash + CFO + CFI + CFF = Closing cash
What explains the difference between net income and cash flow from operations?
What are the major sources and uses of cash from investing activities?
What are the major sources and uses of cash from financing activities?
What do these cash flows suggest about the stage of life cycle of the company?

Ratios
What is the ROE of the company?
Disaggregate the ROE into profitability, productivity, and leverage. What is the main driver of ROE?
How has the ROE and its composition changed in 2020 compared to 2019?
Calculate the Gross profit margin, Operating profit margin, pre-tax profit margin, and net profit margin of the
company?
Do you find any significant trends in profitability ratios?
How many days does the company take to collect cash from its customers
How many days does the company take to sell its inevntory?
How many days does the company take to pay its suppliers?
How long is the cash conversion cycle for this company?
What is the fixed asset turnover of this company?
Do you find and significant trends in productivity ratios?
Session
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PFIZER Inc, Balance sheet Year Ended Decemb
(MILLIONS, EXCEPT PREFERRED STOCK ISSUED AND PER COMMON
SHARE DATA) 2018
Assets
Cash and cash equivalents 1,139
Short-term investments 17,694
Trade accounts receivable, less allowance for doubtful accounts: 2020—$508; 2019
—$493
Inventories 8,025
Current tax assets 7,508
Other current assets 3,374
Current assets of discontinued operations and other assets held for sale 2,461
Assets held for sale 9,725
Total current assets 49,926
Equity-method investments
Long-term investments 2,767
Property, plant and equipment, net 13,385
Identifiable intangible assets 35,211
Goodwill 53,411
Noncurrent deferred tax assets and other noncurrent tax assets 1,924
Other noncurrent assets 2,798
Noncurrent assets of discontinued operations
Total assets 159,422

Liabilities and Equity

Short-term borrowings, including current portion of long-term debt: 2020—$2,002; 8,831
2019—$1,462
Trade accounts payable 4,674
Dividends payable 2,047
Income taxes payable 1265
Accrued compensation and related items 2,397
Other current liabilities 10,753
Current liabilities of discontinued operations 1,890
Total current liabilities 31,858
Long-term debt 32,909
Pension benefit obligations 5,272
Postretirement benefit obligations 1338
Noncurrent deferred tax liabilities 3,700
Other taxes payable 14,737
Other noncurrent liabilities 5,850
Total liabilities 95,664
Commitments and Contingencies
Preferred stock, no par value, at stated value; 27 shares authorized; issued: 2020—0; 19
2019—431
Common stock, $0.05 par value; 12,000 shares authorized; issued: 2020—9,407; 467
2019—9,369
Additional paid-in capital 86,253
Treasury stock, shares at cost: 2020—3,840; 2019—3,835 -101,610
Retained earnings 89,553
Accumulated other comprehensive loss -11,275
Total Pfizer Inc. shareholders’ equity 63,407
Equity attributable to noncontrolling interests 351
Total equity 63,758
Total liabilities and equity 159,422
Year Ended December 31 Common size Compatative

2019 2020 2019 2020 2020

1,121 1,784 1% 1% 59%

8,525 10,437 5% 7% 22%
6,772 7,930 17%
4% 5%
7,068 8,046 4% 5% 14%
2,736 3,264 2% 2% 19%
2,357 3,438 1% 2% 46%
4,224 167 3% 0% -96%

32,803 35,066 20% 23%

17,133 16,856 10% 11% -2%
3,014 3,406 2% 2% 13%
12,969 13,900 8% 9% 7%
33,936 28,471 20% 18% -16%
48,202 49,577 29% 32% 3%
1,911 2,383 1% 2% 25%
4,199 4,570 3% 3% 9%
13,427 8% 0% -100%
167,594 154,229 100% 100% -8%

16,195 2,703 10% 2% -83%

3,887 4,309 2% 3% 11%

2,104 2,162 1% 1% 3%
980 1,049 1% 1% 7%
2,390 3,058 1% 2% 28%
9,334 12,640 6% 8% 35%
2,413 1% 0% -100%
37,303 25,921 -31%
35,955 37,133 21% 24% 3%
5,291 4,766 3% 3% -10%
926 645 1% 0% -30%
5,652 4,063 3% 3% -28%
12,126 11,560 7% 7% -5%
6,894 6,669 4% 4% -3%
104,147 90,757 62% 59% -13%

17 0% 0% -100%

468 470 0% 0% 0%

87,428 88,674 52% 57% 1%

-110,801 -110,988 -66% -72% 0%
97,672 96,769 58% 63% -1%
-11,640 -11,688 -7% -8% 0%
63,144 63,237 38% 41% 0%
303 235 0% 0% -22%
63,447 63,472 38% 41% 0%
167,594 154,229 100% 100% -8%
PFIZER Inc, Income statement Year Ended Decemb
(MILLIONS, EXCEPT PER COMMON SHARE DATA) 2018
Revenues 40,825
Costs and expenses:
Cost of sales 8,987
Selling, informational and administrative expenses(a) 12,612
Research and development expenses(a) 7,760
Amortization of intangible assets 4,736
Restructuring charges and certain acquisition-related costs 1,058
(Gain) on completion of Consumer Healthcare JV transaction
Other (income)/deductions––net 2,077
Income from continuing operations before provision/(benefit) for taxes on income 3,594
Provision/(benefit) for taxes on income -266
Income from continuing operations 3,861
Income from discontinued operations––net of tax 7,328
Net income before allocation to noncontrolling interests 11,188
Less: Net income attributable to noncontrolling interests 36
Net income attributable to Pfizer Inc. common shareholders 11,153
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders 0.65
Income from discontinued operations––net of tax 1.25
Net income attributable to Pfizer Inc. common shareholders 1.9
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders 0.64
Income from discontinued operations––net of tax 1.23
Net income attributable to Pfizer Inc. common shareholders 1.87
Weighted-average shares––basic 5,872
Weighted-average shares––diluted 5,977

2018
Earnings 11,153
Add back
Interest 1,311
Tax 3,655
Depreciation & amortization 6,150

EBIT 16,119
EBITDA 22,269
Year Ended December 31, Common size Comparative
2019 2020 2018 2019 2020 2019 2020
41,172 41,908 100% 100% 100% 1% 2%

8,251 8,692 22% 20% 21% -8% 5%

12,750 11,615 31% 31% 28% 1% -9%
8,394 9,405 19% 20% 22% 8% 12%
4,462 3,436 12% 11% 8%
601 600
-8,086 -6
3,314 669
11,485 7,497 220% -35%
618 477
10,867 7,021
5,435 2,631
16,302 9,652
29 36
16,273 9,616 27% 40% 23%

1.95 1.26
0.98 0.47
2.92 1.73

1.91 1.24
0.96 0.47
2.87 1.71
5,569 5,555
5,675 5,632

2019 2020
16,273 9,616

1,587 1,641
3,664 3,153
5,795 4,777

21,524 14,410
27,319 19,187
PFIZER Inc, Statement of cash flows Year Ended December 31,
(MILLIONS, EXCEPT PER COMMON SHARE DATA) 2018

Operating Activities
Net income before allocation to noncontrolling interests 11,188
Income from discontinued operations—net of tax 7,328
Net income from continuing operations before allocation to noncontrolling 3,861
interests
Adjustments to reconcile net income before allocation to noncontrolling
interests to net cash provided by operating activities:
Depreciation and amortization 6,150
Asset write-offs and impairments 3,398
TCJA impact -596
Gain on completion of Consumer Healthcare JV transaction, net of cash
conveyed(a)
Deferred taxes from continuing operations -2,204
Share-based compensation expense 923
Benefit plan contributions in excess of expense/income -1,057
Other adjustments, net -1,266
Other changes in assets and liabilities, net of acquisitions and divestitures:

Trade accounts receivable -458

Inventories -432
Other assets -52
Trade accounts payable 404
Other liabilities 367
Other tax accounts, net -163
Net cash provided by operating activities from continuing operations 8,875
Net cash provided by operating activities from discontinued operations 6,952
Net cash provided by operating activities 15,827

Investing Activities
Purchases of property, plant and equipment -1,984
Purchases of short-term investments -11,677
Proceeds from redemptions/sales of short-term investments 17,581
Net (purchases of)/proceeds from redemptions/sales of short-term investments -3,917
with original maturities of three months or less
Purchases of long-term investments -1,797
Proceeds from redemptions/sales of long-term investments 6,244
Acquisitions of businesses, net of cash acquired
Acquisitions of intangible assets -152
Other investing activities, net(a) 287
Net cash provided by/(used in) investing activities from continuing operations 4,584
Net cash provided by/(used in) investing activities from discontinued operations -60

Net cash provided by/(used in) investing activities 4,525

Financing Activities
Proceeds from short-term borrowings 3,711
Principal payments on short-term borrowings -4,437
Net (payments on)/proceeds from short-term borrowings with original maturities -1,617
of three months or less
Proceeds from issuance of long-term debt 4,974
Principal payments on long-term debt -3,566
Purchases of common stock -12,198
Cash dividends paid -7,978
Proceeds from exercise of stock options 1,259
Other financing activities, net -588
Net cash provided by/(used in) financing activities from continuing operations -20,441

Net cash provided by/(used in) financing activities from discontinued operations

Net cash provided by/(used in) financing activities -20,441

Effect of exchange-rate changes on cash and cash equivalents and restricted cash -116
and cash equivalents
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash -205
equivalents
Cash and cash equivalents and restricted cash and cash equivalents, at beginning 1,431
of period
Cash and cash equivalents and restricted cash and cash equivalents, at end of 1,225
period

Supplemental Cash Flow Information

Cash paid (received) during the period for:
Income taxes 3,655
Interest paid 1,311
Interest rate hedges -38
Non-cash transactions:
32% equity-method investment in the Consumer Healthcare JV received in
exchange for contributing Pfizer’s Consumer Healthcare business(a)
Equity investment in Allogene received in exchange for Pfizer's allogeneic CAR 92
T developmental program assets
Equity investment in Cerevel in exchange for Pfizer’s portfolio of clinical and 343
preclinical neuroscience assets
Year Ended December 31,
2019 2020

16,302 9,652 2018 2019 2020

5,435 2,631 CFO 15,827 12,588 14,403
10,867 7,021
CFI 4,525 -3,945 -4,271

CFF -20,441 -8,485 -9,649

5,795 4,777 FX adj -116 -32 -8
2,941 2,049 Chanage in cash -205 126 475
-323 Open 1,431 1,225 1,350
-8,233 -6
End 1,226 1,351 1,825
596 -1,468 Reported 1,225 1,350 1,825
688 756 Gap 1 1 0
-288 -1,790
-1,080 -478

-1,140 -1,249
-1,080 -736
840 -146
-340 353
851 2,741
-3,084 -1,238
7,011 10,586
5,576 3,817
12,588 14,403

-2,072 -2,252
-6,835 -13,805
9,183 11,087
6,925 920

-201 -597
232 723
-10,861
-418 -539
195 274
-3,852 -4,188
 -94 -82

-3,945 -4,271

16,455 12,352
-8,378 -22,197
2,551 -4,129

4,942 5,222
-6,806 -4,003
-8,865
-8,043 -8,440
394 425
-736 -869
-8,485 -21,640

11,991

-8,485 -9,649 483

-32 -8

125 475
475
1,225 1,350

1,350 1,825

3,664 3,153
1,587 1,641
-42 -20

15,711
PFIZER Inc Ratio analysis 2018 2019

ROE ANALYSIS
Net income 11,153 16,273
Shareholders' equity 63,758 63,447
Average SE 63,603
ROE 25.59%

Net income 11,153 16,273

Sales 40,825 41,172
Net income / Sales 27% 40%

Total Assets 159,422 167,594

Average total assets 163,508
Sales / Average total assets 0.25

Average total assets 163,508

Average SE 63,603
Average total assets / Average SE 2.6

ROE 25.59%

PROFITABILITY ANALYSIS
Sales 40,825 41,172
COGS 8,987 8,251
Gross margin (Sales - COGS) 31,838 32,921
Operating expenses 25,108 25,606
Operating profit (Sales - COGS - OPEX) 6,730 7,315
Net income 11,153 16,273

Gross profit margin 77.99% 79.96%

Operating profit margin 16.48% 17.77%
Net profit margin 27.32% 39.52%

PRODUCTIVITY ANALYSIS 2018 2019

Net sales 40,825 41,172
Accounts receivable (A/R) 6,500 6,772
Average A/R 6,636
A/R turnover (times per year) 6.2
DSO: Days sales outstanding (days) 59

Cost of products sold 8,987 8,251

Total inventories 8,025 7,068
Average inventories 7,547
Inventory turnover (times per year) 1.1
DIO: Days inventory outstanding (days) 334

Cost of products sold 8,987 8,251

Accounts payable (A/P 4,674 3,887
Average A/P 4,281
A/P turnover (times per year) 1.9
DPO: Days payables outstanding (days) 189

DSO
DIO
DPO
CCC = DSO + SIO - DPO 203

Net sales 40,825 41,172

PP&E 13,385 12,969
Average PP&E 13,177
PP&E turnover 3.12
2020

9,616
63,472
63,460
15.15% 15.15%

9,616
41,908
23% 0.23

154,229
160,912
0.26

160,912
63,460
2.5

15.15%

41,908
8,692
33,216
24,456
8,760
9,616

79.26%
20.90%
22.95%

2020
41,908
7,930
7,351
5.7
64

8,692
8,046
7,557
 1.2
317

8,692
4,309
4,098
2.1
172

209

41,908
13,900
13,435
3.12
Session 2 Poll 3
Refer to the attached financial statements for Pfizer.
1 What is the ROE for year 2020 ? Hint: ROE=Net income/average shareholders' equity
a 25.59%
b 15.15%
c 16.15%
d 24.59%

2 What is the profit margin for the year 2020? Hint: Profit margin = Net income/Sales
a 22.95%
b 39.52%
c 27.32%
d 21.95%

3 What is the operating profit margin of the firm for the year 2020? Hint: Operating profit margin = operating profit
a 16.48%
b 17.77%
c 20.90%
d 22.95%

4 Choose the correct statement for the year 2020

a Profit margin has decreased and ROE has decreased
b Profir margin has decreased and ROE has increased
c Profit margin has increased and ROE has decreased
d Profit margin has increased and ROE has increased
ofit margin = operating profit / sales