Financial Research Report

Introduction

Abbott Laboratories is an American international pharmaceutical company that operates in the provision of heath care and pharmaceutical products. It is headquartered at Abbott Park, Chicago, Illinois. The founder of the company was a Chicago physician Wallace Calvin Abbott, who founded the company in 1888. The company has to its credit the development of world's first HIV blood screening test, in 1985.

Company selection rationale

The rationale for the selection of Abbott Laboratories as a company worthy of an investment choice is fairly straight-forward. It is one of the leading multinational company of the world, and a name that is recognized in almost all over the world. The performance of the company speaks volumes about the financial returns it has to offer. The consistency, with which Abbott Laboratories has performed over the years, is an excellent indicator for safe investments. However, the most significant reason for the investment choice was the fact that it operated in the medical and health care industry. This industry is not likely to face any adverse consequences in the different phases of economic cycles (Moss, J. D., & Stine, B. 1993). The reason is that medical and health care is a basic necessity of a human being. The health of a person is important in every circumstances whether economic boom or recession. It has also been observed that the global recession which the world faced and is still facing, did not have any significant impact on the Abbott Laboratories. Therefore, favorable financial returns coupled with safety of investment makes it an ideal choice for any potential investor.

Potential Investor Profile

The ideal potential investor for investment in Abbott Pharmaceuticals is that which seeks maximum returns on a minimum possible risk. In other words, the investor should be risk averse. The reason is that Abbott Laboratories is a well established global corporation and one of the leading brands in the industry. Therefore, it is unlikely that the corporation of the likes of Abbott is to face a risk of insolvency. In addition, the dominance that the company exerts upon the industry is such that it has captured and retained a significant portion of the market share, which makes the returns inevitable. Hence, it is an ideal company for a risk averse investor.

Selection of Ratios for analysis

Ratio Analysis

Financial ratios are an integral and essential part in the analysis of financial statements and also quantifies many aspects if the business. Financial ratios are divided as per the financial aspect of the business which is assessed by the ratio (CIMA 2011). The availability of finances and cash to cover the debts of the company is analyzed by the liquidity ratios. The ability of the firm to swiftly convert non-cash assets into the cash assets are assessed through the activity ratios. The ability of the firm to cover its long-term debt is calculated by the debt ratios (Altman, E. I. 1968). In order to achieve an appropriate rate of return, a company has to deploy its assets and control its ...