Financial Ratios Analysis

In order to determine the financial health of Wyeth, financial analysts and investors think highly on ratios. Ratios are important profit tools in financial analysis that help financial analysts apply plans that mend profitability, liquidity, financial structure leverage, and pursuance coverage (Saksonova, 2006). Although ratios are compiled on past records, financial ratios can give us a hint of the future problems.

Company - Wyeth ( WYE)

Ratio Analysis:

Leverage Ratios:

Leverage ratios demonstrate how much debt the fellowship is using to finance its assets and operations. These ratios are of item interest to investors and suggest a level of risk. Wyeth is more than leveraged (46 cents of every dollar of semipermanent capital is in the form of long-term debt) in relation to the industry and health care sector. A significant residue of Wyeths capital structure is financed by long-term, interest bearing debt, which makes them more vulnerable. If Wyeth does not generate enough cash to buckle under debts (principal and interest), Wyeth is at risk towards their creditors and this is a cause of concern, as this will walk out their inflow of working capital. Wyeth is at further risk if returns on their investments fall below the cost of borrowing. [Good]However, this does create an advantage in that the interest paid on the debt is deductible in determine income subject to income taxes (Mergent Online, 2005).



[Good]

Despite the above, Wyeth does have the ability to meet their annual interest payments with a satisfactory times interest earned ratio. Wyeths debt virtue ratio is declining indicating the issuance of shareholders equity to raise more capital. [Good]

Liquidity Ratios:

Liquidity ratios heartbeat a companys short-term ability to generate cash to pay current maturing obligations or in cases of emergency. These ratios are also of particular interest to investors. Wyeth has a high liquidity...

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