Interpreting Financial Results
Forest Laboratories Inc. is operated in the health care industry and traded in the New York Stock Exchange Market (NYSE). The following financial ratios can be used to analyze the company.Comparison of 2014 and 2013Forest Laboratories Inc. had a higher current ratio in 2013 than in 2014 implying that it was more liquid in 2013 than in 2014 (yahoo finance, 2015). The company’s profit margin was higher in 2014 than in 2013 implying that it performed well in 2014 than in 2013. 2013 had a higher asset turnover than 2014 implying that most of the assets of 2013 would cover the sales. The company had a higher debt ratio in 2014 than in 2013 implying that it had acquired more debt in 2014.
Comparison of 2013 and 2012
The company was liquid in 2013 than in 2012 since it had a higher current ratio in that period. The company was performing well in 2012 than in 2013 since it had a higher net profit margin ratio as shown below. The company had a higher asset turnover in 2012 than in 2013 implying that more assets would be able to cover the assets in that period. The company had no debt in 2012 implying that it took more debt in 2013 and the debt ratio was higher.Comparison of 2012 and 2011In 2012, the company’s current ratio was 3.86, which was lower than that of 2011 of 5.61. This implies that it was liquid in 2011 than in 2012. The company had a higher profit margin in 2011 than in 2012 implying that it was performing well in 2011 than in 2012 (Williams, & Carcello, 2008). It also had a higher asset turnover in 2011 than in 2012 implying that more assets could cover the sales in 2011 than in 2012. Lastly, Forest Laboratories inc. had no debt both in 2011 and in 2012. The following equations can explain further the comparisons.
Comparison with the industry
The company’s current ratio in all years was higher than the industry of 1, which implies that it was more liquid than the industry. The industry has a profit margin of 3.2%, which the company managed to beat except in 2013. This implies that the company was performing well except in 2013 where the performance was not as per the industry (Weston, 2010). The health care industry asset turnover is 0.43 or 43%, which the company achieved except in 2013 and 2014. Lastly, the industry has a debt to equity ratio of 0.59 or 59%, which the company did not achieve in years implying that the debt it acquired was less as compared to the industry (Yahoo finance, 2015).
Yahoo Finance (2015). Forest Laboratories Inc. Financial Statements. Retrieved on 23rd Jan 2016 from http://www.yahoo-finance.com/forest-laboratories-inc./financial-statements/
Williams, R. & Carcello, J. (2008). Financial & Managerial Accounting. McGraw-Hill Irwin. ISBN 978-0-07-299650-0. Retrieved on 23rd Jan 2016.
Weston, J. (2010). Essentials of Managerial Finance. Hinsdale: Dryden Press. ISBN 0-03-030733-3. Retrieved on 23rd Jan …