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Financial of Merck

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Financial Health Of Merck

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Merck and Co., Inc. appears to be a continued uprising pharmaceutical company but only financial ratios can determine what their financial situation truly is. In looking at company evaluation, the last two annual reports from previous years should be carefully analyzed before making any major decisions. Since Merck is a pharmaceutical company, it would probably be an excellent idea to compare this company to another in the same industry. Company Background Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs (Merck, 2009). In addition, the company devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but also help deliver them to the people who need them. The company’s operations are principally managed on a products basis and are comprised of two reportable segments: the pharmaceutical segment and the vaccines segment (Annual Reports, 2008). Financial Ratios In order to figure out how the success of a company’s operations is, it is essential to put the financial ratios to work. Comparing ratios to those of a company in the same industry is an excellent way to see if success is happening and if success is in the future. The most common types of ratios are liquidity and profitability. The first liquid ratio that will be used is the current ratio. Current Ratio The current ratio is determined by the current assets divided by current liabilities. In the following ratios, Merck’s numbers are stated in millions. For 2007, the total current assets for Merck were $15,045.40 and the total current liabilities were $12,258.20. Dividing these two figures gives an answer of 1.23, which means that for every $1 in liabilities, Merck has $1.23 in current assets. If Merck were compared to another

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