Question

Comparing Firms Using Ratio Analysis

Consider the following 2013 data for several pharmaceutical firms ($ millions):

	Average Current Liabilities	Cash from Operations	Expenditures on PPE	Proceeds from the Sale of PPE
Merck & Co., Inc.	$18,108	$11,654	$1,548	$0
Pfizer Inc.	26,276	17,765	1,206	0
Abbott Laboratories	11,394	3,324	1,145	0
Johnson & Johnson	24,969	17,414	3,595	458

a. Compute the operating cash flow to current liabilities (OCFCL) ratio for each firm.
(Round your answer to two decimal places.)

	Merck & Co., Inc.	Answer
	Pfizer Inc.	Answer
	Abbott Laboratories	Answer
	Johnson & Johnson	Answer

b. Compute the free cash flow for each firm.

	Merck & Co., Inc.	Answer
	Pfizer Inc.	Answer
	Abbott Laboratories	Answer
	Johnson & Johnson	Answer

Answer 1

a)	operating cash flow to current liabilities
	=Operating Cash Flows / current liabilities
	Merck & Co., Inc.		=	$         11,654	/	18108	0.64
	Pfizer Inc.		=	$         17,765	/	26276	0.68
	Abbott Laboratories		=	$           3,324	/	11394	0.29
	Johnson & Johnson		=	$         17,414	/	24969	0.70
b)	free cash flow for each firm.
	= Cash Flow From Operation - Expenditure on PPE
	Merck & Co., Inc.		=	$         11,654	-	1548	$         10,106
	Pfizer Inc.		=	$         17,765	-	1206	$         16,559
	Abbott Laboratories		=	$           3,324	-	1145	$           2,179
	Johnson & Johnson		=	$         17,414	-	3595	$         13,819
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