Company Utilization of Assets

                The inventory turnover ratio of Baxter is increased over the period of time from 6.21 to 7.11. While on the other hand, day’s sales outstanding, fixed asset turnover, and total asset turnover are changed during these fiscal years. Considering the changes occurred in these asset utilization ratios we can say that inventory turnover ratio is below the market average. Somehow, other ratios including fixed asset turnover, total asset turnover, and day’s sales outstanding are above average ratios of industry. Conclusively, we can say that Baxter is utilizing its assets in a better way as compared to the other companies of the same industry. Company has the strength to generate more profit from the use of fixed assets including plant, equipment, and building.

Financial Leverage and ratios conclusion

    The debt to asset ratio and times interest earned ratios indicate that debt to asset ratio is decreased over the period of time while time interest earned show increase in ratio.

        Comparing this to the market or industry average ratio and competitor companies we can conclude that the financial leverage ratio is below the average and competitors ratio. Low financial leverage ratio shows that the company has a lower equity multiplier. In accordance with this, we can conclude that the company needs to use less debt to get financing for their assets.

Profitability and Market Ratios

DuPont Equation

Considering the results of the DuPont equation we can say that major strength and weaknesses of the company areas:

Strengths of the Company

Company is mainly financing its operations from assets rather than debt or equity.

Weaknesses of the Company

Equity multiplier of the company is showing huge changes and unstable condition.