Baxter International Inc. Company Description

            In this section, important information regarding two famous healthcare companies (Baxter International Inc. and Abbott Laboratories) is presented along with the detailed description of the industry, motivation, and competitors.

Baxter International Inc.

        Baxter International Inc. works in the health care industry to produce and sell out medical equipment for hospitals and health care centers. As an international company, Baxter works in a number of countries around the world. Somehow the main head office is located in Deerfield Illinois. Baxter International Inc. company is not new in the market in fact company is established well in the targeted market with strong customer equity. Better opportunity to growth and increasing customer equity is a factor of motivation for Baxter International Inc. Somehow, the company has a number of competitors posing threats for future growth. Some of these competitor companies are Grifols, Johnson & Johnson, Abbott Laboratories, and Fresenius Medical care AG.

Abbott Laboratories of Baxter International Inc

        “Abbott Laboratories” is working as a health care equipment and service providing company in the health care industry. The main head office of the Abbott Laboratories is situated in North Chicago, Illinois. Current industrial analysis present that health care industry as a growing business in under-developing countries as in the developed countries diseases rate and death rate are not really high because of modern technologies and better healthcare practices employed by the medical centers and public health care centers  (Annualreports.com, 2016). Competitor companies of Abbott laboratories are Baxter International Inc., Pfizer, GSK, and Novartis (NVS).

Importance of Ratios of Baxter International Inc

        Ratio analysis is really important in the financial analysis in order to get an idea about the financial performance of the company. Ratio analysis has five major categories including Market ratio analysis, liquidity ratio analysis, asset management (Activity) ratio analysis, profitability ratio analysis, and debt ratio analysis. Each ratio has some specific areas to be covered for the presentation of financial outcomes and performance. Ratio analysis presents that how efficiently managers are managing assets in operations or activities to generate profit. Moreover, ratios also elaborate on the percentages of profit generated by the company in a fiscal year while considering the expenses, cost, and EBITDA. In addition, ratio analysis is also important as ratios can present whether a company is maintaining the right balance between current liabilities and current assets. In short, ratio analysis is important as these present actual information of a company (Tulsian, 2002).

Ratio Analysis of Baxter International Inc

Liquidity ratios of Baxter International Inc.

        The following table represents results of liquidity analysis taken for Baxter International Inc. during 2016 and 2015  (Annualreports.com, 2016).

Liquidity ratios of Abbott Laboratories

        The mentioned below table shows the results of the liquidity ratio analysis of Abbott laboratories during the fiscal years of 2016 and 2015. Liquidity analysis cover information about current ratio, quick ratio, and cash ratio.

Horizontal and Vertical Analysis

Vertical Analysis of Baxter International Inc

        In this section vertical analysis are presented for two companies Baxter International Inc. and Abbott Laboratories. Presented below table consider the liquidity ratios for both companies during the two years 2015 and 2016 (Annualreports.com, 2016).

        According to the vertical analysis, Abbott laboratories had a current ratio greater than Baxter International in 2016 by 59%. While similar to this quick ratio of Baxter International Inc. is less than the quick ratio of Baxter International Inc. in 2016 by 51%. Somehow, in 2015 current ratio and quick ratios of Baxter International Inc. were greater than Abbott Laboratories by the percentages of 75% and 70%.

        The above mentioned vertical analysis of ratios suggests that the current ratio is greater than the quick ratio which indicates that both companies are mainly emphasizing on inventory (Tulsian, 2002). Both companies have a strategy to pay off liabilities with the sales of inventory.

Horizontal Analysis of Baxter International Inc

The horizontal analysis presents changes in the ratio during one fiscal year (from 2015 to 2016).

        According to the horizontal analysis current, quick, and cash ratio of Baxter International Inc. are showing a positive growth trend. While on the other hand, Abbott laboratories are also presenting a positive growth rate somehow with relatively greater percentages as compared to Baxter International Inc.

Outcomes of Ratios of Baxter International Inc

            Outcomes of ratio analysis indicate the capability of Baxter International Inc. and Abbott laboratories in paying back its current term obligations or liabilities without liquidating its fixed assets. Outcomes suggest that Baxter International Inc. and Abbott laboratories can easily deal with short term obligations with current assets including cash, inventory, marketable securities, and all other non-fixed assets. The current ratio of Baxter International Inc. and Abbott laboratories are greater than 1 which represents that both companies can use their current assets to meet obligations due in the current fiscal year without selling the plant or fixed equipment. Vertical analysis suggests that companies have kept high ratios of inventory in the companies which are the main reason for better liquidity condition in the company. Furthermore, ratio analysis also elaborates that Baxter International Inc. has cash availability below the minimum requirement of the year. Concluding the whole discussion we can say that liquidity condition of Baxter International is better than Abbott Laboratories. However, liquidity condition of Abbott Laboratories can be improved if company starts paying attention on other current assets (like cash) rather than only inventory to meet short term obligations.    

Appendix

Figure 1Balance Sheet of Baxter International Inc.

Figure 2 Abbott Balance Sheet