Financial Comparison of Eli Lilly & Competitors

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Eli Lilly and Company is one of the world’s top pharmaceutical companies, and is located in the United States. Their main competitors in the United States are Johnson and Johnson Corporation and Pfizer Incorporated. All three companies specialize in the manufacturing of pharmaceutical and medical products.

Using the financial ratios to analyze Eli Lilly’s competitive position, it is apparent that in most cases the company comes in second place with regards to its top 2 competitors. The short term solvency ratios indicate the liquidity of the company by comparing the current assets of the company with the current liabilities as a means to show how easily they can pay off their debts. Specifically Eli Lilly has a better current ratio than both companies, and a quick ratio that is better than Johnson and Johnson but only slightly worse than Pfizer.

Other ratios to consider when comparing the Eli Lilly with its competitors are the activity ratios, which show how the assets are managed in order to create sales. Eli Lilly’s asset turnover ratio is low at only .765, meaning it could be managing its assets better to create more operating revenue. Even though this ratio is low, it is still better than the asset turnover ratio of Pfizer but not Johnson and Johnson. Their receivables turnover ratio is the highest amongst competitors, showing it turns its receivables over into revenue more often than its competitors. Also its average collection period is lower than competitors, meaning they might have a strict credit policy but they also are effective at collecting money on sales. Inventory turnover and the days in inventory ratios show Eli Lilly is in worse standing for both ratios relative to competitors.

Looking into the financial leverage ratios, Eli Lilly and Company has a higher Debt, Debt to Equity, and Equity Multiplier than both of their top two competitors. This means that Eli Lilly does not manage their debt well, and they use it to finance their business...
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