Question

What is the Interpretation between the two companies' ratios for The 2015 & 2016 Celgene & 2015 & 2016 Gilead Financial statements used to calculate these ratios.

		Gilead Sciences Inc.			Celgene Corp.
Earnings per Share of Common Stock (basic - common)	As given in the income statement			$           10.08			$             2.57
Current Ratio	Current Assets	$20,445.0	=	2.22	$10,867.5	=	3.67
	Current Liabilities	$9,219.0			$2,959.2
Gross (Profit) Margin Percentage	Gross Margin	$26,129.0	=	86.0%	$10,746.6	=	96.1%
	Net Sales	$30,390.0			$11,184.6
Rate of Return (Net Profit Margin) on Sales	Net Income	$13,488.0	=	44.4%	$1,999.2	=	17.9%
	Net Sales	$30,390.0			$11,184.6
Inventory Turnover	Cost of Goods Sold	$4,261.0		2.4	$438.0		0.9
	Average Inventory	$1,771.0		times	$470.7		times
Days' Inventory Outstanding (DIO)	365 Days	$365.0	=	152	$365.0	=	392
	Inventory Turnover	$2.4		days	$0.9		days
			=

Answer 1

		Gilead Sciences Inc.			Celgene Corp.
Earnings per Share of Common Stock (basic - common)	As given in the income statement			$           10.08			$             2.57	Gilead is providing better returns to common stock holders as their stock holders have allocable earning of 10.08 per share as compared to 2.57 per share offered by Celgene
Current Ratio	Current Assets	$20,445.00	=	2.22	$10,867.50	=	3.67	Higher current ration of Celgene shows better ability to pay short term and long term debts. However, it should be noted that as standalone, even Gilead's Current ration is good
	Current Liabilities	$9,219.00			$2,959.20
Gross (Profit) Margin Percentage	Gross Margin	$26,129.00	=	86.00%	$10,746.60	=	96.10%	Celgene is earning higher contribution as a percentage of their sales which shows that the percentage of cost of good sold is lesser. This is good sign as higher margins will be avialable to cover operational expense and result in higher net profits
	Net Sales	$30,390.00			$11,184.60
Rate of Return (Net Profit Margin) on Sales	Net Income	$13,488.00	=	44.40%	$1,999.20	=	17.90%	If we compare Gross Margin and Net Margin ratios, we see that inspite of having higher Gross Margin ration, Celgene has very low net profit ratio. This clearly shows that Celgene opeartional and administrative costs are very high as compare to Gilead
	Net Sales	$30,390.00			$11,184.60
Inventory Turnover	Cost of Goods Sold	$4,261.00		2.4	$438.00		0.9	this ratio shows how effectively inventory is managed by the company. It shows how many times average inventory is sold by the company. The higher ratio is indication of better inventory management and reduction in inventory related costs like storage. Gilead is managing inventorymore effectively than Celgene
	Average Inventory	$1,771.00		times	$470.70		times
Days' Inventory Outstanding (DIO)	365 Days	$365.00	=	152	$365.00	=	392	This ratio shows average number of days, the company is holding inventory. The smaller the ratio, the better it is. Gilead is managing the inventory in more efficient way
	Inventory Turnover	$2.40		days	$0.90		days

Overall, Gilead has a better financial position and profitability