Baxter International: a comprehensive analysis

Analyzing a set of financial statements involves using ratios of key financial variables and other analytical tools to gain insight into the operating performance and financial health of a firm. Decisions based on this information can include those regarding equity investment, supplier health, credit extension, customer health, and valuation of an acquisition candidate. This paper looks at one firm's performance and health by examining its profitability, liquidity risk, and solvency risk. Additionally, the analysis must include an understanding of the economics and current conditions of the industry in which a firm operates. A comparison of Baxter International with the industry as well as two of its competitors is included. Only after examining all of the data can an informed decision be made regarding this, or any, firm. Baxter is a well established, multimillion dollar firm with numerous competitors in the changing health field. They hold a dominant market position. However, they have seen poor financial results in recent years. They have greatly increased their debt load. Net income has declined while net sales have increased. Some of their financial ratios have improved, while many more have worsened. In comparison with two competitors and the industry, Baxter tends to be outperformed in many ways. Baxter has begun to make changes in their effort to improve their financial condition. Their 1994 results are very impressive, indicating they are on the road to recovery.