IntroductionCSL Limited is a drug manufacturer. The company has a huge presence and deals in “medicines, blood plasma derivatives, anti venom and other similar products”. (CSL Limited Website, 2010) The fact that the company deals in so many products and huge reach has given a wide market. The company has a presence in many countries due to the need served by the medicine manufactured by them which is used widely. Baxter International is also a drug manufacturer. The company deals in “products to treat haemophilia, kidney, and other chronic and acute disease”.
(Baxter International Website, 2010) The wide range of medicines and the ease with it relieves the patients from the pain has made it a huge success. The financial statement of both the companies reveals so. Even the share prices shows improvement. With increase in patients due to growing disease is creating a big market for both this giant to cater to. Purpose of the reportTo identify the key areas for CSL Limited and Baxter International and their effect on performanceTo compare the financial performance of CSL Limited and Baxter International and identify areas of strength and weaknessTo identify the investment avenues for CSL Limited and Baxter International from the point of shareholdersFinancial AnalysisFinancial analysis is very important for all business.
Analyzing the statement helps in “planning, budgeting, monitoring, forecasting and improving the financial performance by taking vital decision”. (Micro Strategy, 2010) Proper analysing helps a long way to “understand the financial health”. (Micro Strategy, 2010) It helps to identify trends and compare with competitors and industry to gain advantage. The following is the ratios for CSL Limited and Baxter International. Liquidity RatiosThis ratio plays an important part and helps “to identify the firms ability to meet its short term obligations and plays a huge role in the performance”.
(Financial Modelling Guide, 2010) The ratios for CSL Limited and Baxter International areCurrent Ratio: “It measures the ability to pay the short term liabilities out of short term assets”. (Financial Modelling Guide, 2010) This ratio helps creditors, suppliers and investor to identify the liquid position. It is calculated as “Current Assets / Current Liabilities”. The current ratios for both the companies are as (appendix)The ratio shows that CSL Limited has a better liquidity position as compared to Baxter International.
CSL Limited need to bring down the ratio as it is a concern as the short term assets are more than warranted. This might lead to parking of idle cash. Baxter International on the other hand is in a better position but still needs to take it slightly up. When we consider the two companies together it shows that Baxter International has better policies and strategies as compared to CSL Limited. The positive for CSL Limited is that they have improved it drastically.
They need to work more and ensure that it comes down to around 2. Both the companies are showing that they have sufficient funds to meet short term obligationsQuick Ratio: It is also known as acid test ratio. “It measures the ability of the firm to meet its short term obligation when inventories are removed as inventories take some time to be converted into cash”. (Financial Modelling Guide, 2010) It is calculated as “(Current Assets – Inventories) / Current Liabilities”.
The ratios for both the companies are as