VERTICAL ANALYSIS (COMMON-SIZE ANALYSIS) PFIZER AND COMPETITORS(Merck & Co and Johnson & Johnson)

Vertical/Common-size analysis expresses items in a financial statement as a percentage of a single or base amount. This allows analysis of two or more corporations of varying sizes. This analysis must be compared and contrast to a similar analysis with the companies leading competitor.

I. For an Income Statement, items are usually expressed as a percentage of revenue. Perform vertical analysis in relation to revenue for the following items in the Income Statement for the current year for each of the two corporations.

Current Year

Revenue 100%

COGS

Operating Expense

Interest Expense

Income Tax Expense

Net Income

II. For a Balance Sheet, vertical analysis is performed by expressing amounts as a percentage of total assets. These percentages are then compared to percentages calculated for another corporation (inter-company analysis). Perform common-size analysis of the following for Pfizer and its competitors Merck &Co. and Johnson & Johnson.

Current Year

Current Assets

Property, Plant and Equipment

All Other Assets

TOTAL ASSETS 100%

Current Liabilities

Total Liabilities

Stockholders Equity

Based on this analysis, what conclusions can be drawn about the two companies?