I have attached their Consolidated Balance Sheets which reports assets, liabilities and shareholders’ equity as of December 31, 2019 and 2018. Required: Using the Abbott Lab’s balance sheet, answer the following:Which balance sheet line items would you use to evaluate the company’s liquidity, i.e., ability to meet short-term obligations and remain capable of dealing with unexpected opportunities or challenges.For both periods presented, compute “net working capital” for the periods presented. Net working capital = Current assets – Current liabilitiesBased on your computation, has Abbott’s net working capital improved or declined?Which balance sheet line items would you use to evaluate the company’s solvency, i.e. ability to meet long-term obligations, execute the company’s long-term strategic initiatives, and remain in business.For both periods presented, compute Abbott Lab’s “Debt-to-equity” ratio. Debt-to-equity = Total liabilities ÷ Total shareholders’ equity.Based on your computations, has Abbott’s Debt-to-equity improved or declined? **Abbott Laboratories and Subsidiaries****Consolidated Statement of Earnings** *(in millions except per share data)***Year Ended December 31**| | 2019 | 2018 | 2017 ||----------------------|-----------|-----------|-----------|| **Net Sales** | $31,904 | $30,578 | $27,390 || Cost of products sold, excluding amortization of intangible assets | 13,231 | 12,706 | 12,409 || Amortization of intangible assets | 1,936 | 2,178 | 1,975 || Research and development | 2,440 | 2,300 | 2,260 || Selling, general and administrative | 9,765 | 9,744 | 9,182 || **Total Operating Cost and Expenses** | 27,372 | 26,928 | 25,826 || **Operating Earnings** | 4,532 | 3,650 | 1,564 || Interest expense | 670 | 826 | 904 || Interest income | (94) | (105) | (124) || Net foreign exchange (gain) loss | 7 | 28 | (34) || Debt extinguishment costs | 63 | 167 | — || Other (income) expense, net | (191) | (139) | (1,413) || **Earnings from Continuing Operations Before Taxes** | 4,077 | 2,873 | 2,231 || Taxes on Earnings from Continuing Operations | 390 | 539 | 1,878 || **Earnings from Continuing Operations** | 3,687 | 2,334 | 353 || **Net Earnings from Discontinued Operations, net of taxes** | — | 34 | 124 || **Net Earnings** | $3,687 | $2,368 | $477 |**Basic Earnings Per Common Share:**| | 2019 | 2018 | 2017 ||----------------------|-----------|-----------|----------- ### Abbott Laboratories and Subsidiaries#### Consolidated Balance Sheet(Dollars in millions)**Assets**- **Current assets:** - Cash and cash equivalents: - 2019: $3,860 - 2018: $3,844 - Investments, primarily bank time deposits and U.S. treasury bills: - 2019: $280 - 2018: $242 - Trade receivables, less allowances of—2019: $384; 2018: $314: - 2019: $5,425 - 2018: $5,182 - Inventories: - Finished products: - 2019: $2,784 - 2018: $2,407 - Work in process: - 2019: $560 - 2018: $499 - Materials: - 2019: $972 - 2018: $890 - Total inventories: - 2019: $4,316 - 2018: $3,796 - Other prepaid expenses and receivables: - 2019: $1,786 - 2018: $1,568 - Total current assets: - 2019: $15,667 - 2018: $14,632- **Investments:** - 2019: $883 - 2018: $897- **Property and equipment, at cost:** - Land: - 2019: $519 - 2018: $501 - Buildings: - 2019: $3,702 - 2018: $3,555 - Equipment: - 2019: $11,468 - 2018: $10,756 - Construction in progress: - 2019: $1,110 - 2018: $894 - Total: - 2019: $16,799 - 2018: $15,706 - Less: accumulated depreciation and amortization: - 2019: $8,761 - 2018: $8,143 - Net property and equipment

Liquidity ratios: These ratios are used to evaluate the ability of an organization to pay off its…

Answered: Required: Using the Abbott Lab’s…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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I have attached their Consolidated Balance Sheets which reports assets, liabilities and shareholders’ equity as of December 31, 2019 and 2018.

Required: Using the Abbott Lab’s balance sheet, answer the following:

Which balance sheet line items would you use to evaluate the company’s liquidity, i.e., ability to meet short-term obligations and remain capable of dealing with unexpected opportunities or challenges.
1. For both periods presented, compute “net working capital” for the periods presented. Net working capital = Current assets – Current liabilities
2. Based on your computation, has Abbott’s net working capital improved or declined?
Which balance sheet line items would you use to evaluate the company’s solvency, i.e. ability to meet long-term obligations, execute the company’s long-term strategic initiatives, and remain in business.
1. For both periods presented, compute Abbott Lab’s “Debt-to-equity” ratio. Debt-to-equity = Total liabilities ÷ Total shareholders’ equity.
2. Based on your computations, has Abbott’s Debt-to-equity improved or declined?

**Abbott Laboratories and Subsidiaries**

**Consolidated Statement of Earnings**
*(in millions except per share data)*

**Year Ended December 31**

| | 2019 | 2018 | 2017 |
|----------------------|-----------|-----------|-----------|
| **Net Sales** | $31,904 | $30,578 | $27,390 |
| Cost of products sold, excluding amortization of intangible assets | 13,231 | 12,706 | 12,409 |
| Amortization of intangible assets | 1,936 | 2,178 | 1,975 |
| Research and development | 2,440 | 2,300 | 2,260 |
| Selling, general and administrative | 9,765 | 9,744 | 9,182 |
| **Total Operating Cost and Expenses** | 27,372 | 26,928 | 25,826 |
| **Operating Earnings** | 4,532 | 3,650 | 1,564 |
| Interest expense | 670 | 826 | 904 |
| Interest income | (94) | (105) | (124) |
| Net foreign exchange (gain) loss | 7 | 28 | (34) |
| Debt extinguishment costs | 63 | 167 | — |
| Other (income) expense, net | (191) | (139) | (1,413) |
| **Earnings from Continuing Operations Before Taxes** | 4,077 | 2,873 | 2,231 |
| Taxes on Earnings from Continuing Operations | 390 | 539 | 1,878 |
| **Earnings from Continuing Operations** | 3,687 | 2,334 | 353 |
| **Net Earnings from Discontinued Operations, net of taxes** | — | 34 | 124 |
| **Net Earnings** | $3,687 | $2,368 | $477 |

**Basic Earnings Per Common Share:**

| | 2019 | 2018 | 2017 |
|----------------------|-----------|-----------|-----------

### Abbott Laboratories and Subsidiaries
#### Consolidated Balance Sheet
(Dollars in millions)

**Assets**

- **Current assets:**
- Cash and cash equivalents:
- 2019: $3,860
- 2018: $3,844
- Investments, primarily bank time deposits and U.S. treasury bills:
- 2019: $280
- 2018: $242
- Trade receivables, less allowances of—2019: $384; 2018: $314:
- 2019: $5,425
- 2018: $5,182
- Inventories:
- Finished products:
- 2019: $2,784
- 2018: $2,407
- Work in process:
- 2019: $560
- 2018: $499
- Materials:
- 2019: $972
- 2018: $890
- Total inventories:
- 2019: $4,316
- 2018: $3,796
- Other prepaid expenses and receivables:
- 2019: $1,786
- 2018: $1,568
- Total current assets:
- 2019: $15,667
- 2018: $14,632

- **Investments:**
- 2019: $883
- 2018: $897

- **Property and equipment, at cost:**
- Land:
- 2019: $519
- 2018: $501
- Buildings:
- 2019: $3,702
- 2018: $3,555
- Equipment:
- 2019: $11,468
- 2018: $10,756
- Construction in progress:
- 2019: $1,110
- 2018: $894
- Total:
- 2019: $16,799
- 2018: $15,706
- Less: accumulated depreciation and amortization:
- 2019: $8,761
- 2018: $8,143
- Net property and equipment

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