Go to each company’s website and review the most recent financial statements for each company and...

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Go to each company’s website and review the most recent financial statements for each company and answer the following questions.  	What accounting standards are used? 	What auditing standards are used by the external auditors? 	Analyze and comment on the differences in the annual statements found on the companies' websites. Provide a few specific differences in content and format. 	How comparable are these financial statements? 	Prepare a table for a period of three years showing some key financial information for the two companies. Include at least four items from the balance sheet, four items from the income statement, and four items from the statement of cash flow. Having reviewed and analyzed the financial information, please elaborate on the following three questions.    	Which one of the two companies is the most profitable? 	Compare growth of revenues versus income over time and between the two companies 	How can you explain the difference in profitability between the two companies? 	Indicate in detail the information you used to answer the above questions.  Modular Case Assignment ExpectationsIt is important to answer the questions as posed.The discussion should be from 3 to 5 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.
	
Document Preview: Merck & Co. Inc. and Novartis International AG - Two Pharmaceutial CompaniesMerck & Co. IncHere's the homepage for Merck. HYPERLINK "http://www.merck.com/index.html" http://www.merck.com/index.htmlNovartis International AGHere's the homepage for Novartis. HYPERLINK "http://www.us.novartis.com/" http://www.us.novartis.com/Required:Go to each company’s website and review the most recent financial statements for each company and answer the following questions.What accounting standards are used?What auditing standards are used by the external auditors?Analyze and comment on the differences in the annual statements found on the companies' websites. Provide a few specific differences in content and format.How comparable are these financial statements?Prepare a table for a period of three years showing some key financial information for the two companies. Include at least four items from the balance sheet, four items from the income statement, and four items from the statement of cash flow. Having reviewed and analyzed the financial information, please elaborate on the following three questions.Which one of the two companies is the most profitable?Compare growth of revenues versus income over time and between the two companiesHow can you explain the difference in profitability between the two companies?Indicate in detail the information you used to answer the above questions. Modular Case Assignment ExpectationsIt is important to answer the questions as posed.  The discussion should be from 3 to 5 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

Robert · Accepted Answer

FINANCIAL ANALYSIS 
Merck & Co. Inc. and Novartis International AG
Executive summary 
In the present assignment we have performed the financial analysis of two publically 
listed entities which are as follows:- 
a) Merck & Co. Inc. 
b) Novartis International AG. 
Merck & Co. Inc. is an American pharmaceutical company operating worldwide. It was 
founded in year 1981; its headquarters is currently located in white house station, New Jersey. 
The company is the first one in American companies in pharmaceutical sector which offered 
assistance to those people which could not afford its medications. Currently company is running 
several assistance programs and each program has its own specialty. The total employees 
strength of the company as on 31
st
 Dec 2012 is 83,000 employees, out of these 83,000 employees 
32,500 are employed in United States.  
Novartis International AG is a Swiss multinational pharmaceutical company and is 
world’s second largest company in terms of sales revenue in pharmaceutical sector. Novartis was 
founded in year 1996 and its headquarters is situated in Basel, Switzerland. Novartis is formed in 
1996 by merger of Sandoz Laboratories and Ciba-Geigy. With its total employees strength of 
119,418 in 2010 company is providing employment to huge number of people across the world. 
Both of the companies are operating in the field of pharmaceutical products in United 
States, Switzerland and worldwide. There are many ways or tools that can be used to analyze the 
financial statements. The basic purpose of analyzing the financial statement of any entity is to 
find out the strength and weakness of the entity. Financial analysis is done by establishing 
relationship between various items of balance sheet and profit and loss account. The financial 
figures alone are not able to provide a clear and true picture therefore various tools are used to 
analyze the financial statements. 
Various tools that can be used to analyze the financial statements are Horizontal and 
Vertical analyses, Ratio analyses, fundamental analyses etc. Ratio analyses uses different items 
of balance sheet and profit and loss account and establish relationship between them and then 
compare it with the benchmark set by the industry, some of the important ratios are current ratio, 
quick ratio, debt to equity ratio, return on shareholders’ equity, debtors turnover ratio etc. In 
horizontal and vertical analyses data of more than one accounting period of same periodicity are 
compared to each other and the differences are analyzed. Analyses of financial statement are 
based on past period data therefore it does not provide more information about the future 
prospects of the company. 
Financial statement analysis 
Accounting standards: 
We have reviewed the financial statements of both the companies, and following are the 
major point which we have came across while analyzing the financial statements. 
Novartis International AG is using IFRS to prepare its financial statements; these 
standards are being issued by IASB. Following are the few major accounting standards and 
policies used by Novartis to prepare its financial statements:- 
 Scope of consolidation: - Company consolidates its financial statements with all 
those entities in which company owns more than 50% of equity.

Go to each company’s website and review the most recent financial statements for each company and answer the following questions. What accounting standards are used? What auditing standards are used...

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