Abstract
The medical device industry is highly competitive. Of the top 40 international manufacturers, according to the journal Medical Device and Diagnostics Industry (MDDI), the only UK company on the list is Smith & Nephew, ranked 21st with market capitalization of $14.9 billion and its major rival is an US company in 19th place named Zimmer Biomet with market capitalization of $17.0 billion. This report will evaluate the current performance, financial position and liquidity of Smith & Nephew with a particular emphasis on comparison with Zimmer Biomet.
1. Introduction
Smith & Nephew is a British-based multinational medical technology business founded in 1856. By 2014, Smith & Nephew has employed 13,468 employees to support healthcare professionals …show more content…
In 2014, in order to enhance its leadership in the global musculoskeletal healthcare industry, Zimmer holdings Inc. announced that it had agreed to purchase Biomet. The powerful coalition between Zimmer and Biomet might have an adverse effect on Smith & Nephew’s market share.
According to bar chart 2, both net profit margins of Smith & Nephew and Zimmer Biomet experienced a decline from 2013 to 2014 when Zimmer Biomet was always higher than that of Smith & Nephew. Therefore in these two years Zimmer Biomet was better at converting revenue into profits available for shareholders than its competitor, challenging market conditions for Smith & Nephew to secure its position as the dominant force in the industry.
Detailed figure in table 2 illustrates that while the increasing consumer demand on advanced medical devices brought outstanding sales growth, net profits of these two companies was falling considerably. On the basis of the consolidate income statement, the total operation expenses in 2014 increased at the same rate with sales revenue is the major reason for the reduction in both net profit margin. As to Smith & Nephew, the underlying movement in operating expenditure is 5% after adjusting for the net impact from ArthroCare acquisition. The increase relates to the cost of holding …show more content…
Current ratio (Current Assets / Current Liabilities) evaluates a company’s ability to meet its short-term obligations with current assets, thus it is an appropriate ratio to assess a company’ solvency. Meanwhile, the Operating Cash Flow Ratio (Cash from Operations / Current Liabilities) demonstrates to what extent a company can meet current liabilities with cash flows generated from operating activities.
Column chart 4 shows that both companies investigated have a ratio over 2 which commonly considered being a sign of great financial health. Current assets twice as large as current debts, hence this is not of critical concern to Smith & Nephew given the overall debt burden of the company. On the other hand, a high current ratio (over 4) for Zimmer Biomet does not necessarily indicate an efficient operating
The medical device industry is highly competitive. Of the top 40 international manufacturers, according to the journal Medical Device and Diagnostics Industry (MDDI), the only UK company on the list is Smith & Nephew, ranked 21st with market capitalization of $14.9 billion and its major rival is an US company in 19th place named Zimmer Biomet with market capitalization of $17.0 billion. This report will evaluate the current performance, financial position and liquidity of Smith & Nephew with a particular emphasis on comparison with Zimmer Biomet.
1. Introduction
Smith & Nephew is a British-based multinational medical technology business founded in 1856. By 2014, Smith & Nephew has employed 13,468 employees to support healthcare professionals …show more content…
In 2014, in order to enhance its leadership in the global musculoskeletal healthcare industry, Zimmer holdings Inc. announced that it had agreed to purchase Biomet. The powerful coalition between Zimmer and Biomet might have an adverse effect on Smith & Nephew’s market share.
According to bar chart 2, both net profit margins of Smith & Nephew and Zimmer Biomet experienced a decline from 2013 to 2014 when Zimmer Biomet was always higher than that of Smith & Nephew. Therefore in these two years Zimmer Biomet was better at converting revenue into profits available for shareholders than its competitor, challenging market conditions for Smith & Nephew to secure its position as the dominant force in the industry.
Detailed figure in table 2 illustrates that while the increasing consumer demand on advanced medical devices brought outstanding sales growth, net profits of these two companies was falling considerably. On the basis of the consolidate income statement, the total operation expenses in 2014 increased at the same rate with sales revenue is the major reason for the reduction in both net profit margin. As to Smith & Nephew, the underlying movement in operating expenditure is 5% after adjusting for the net impact from ArthroCare acquisition. The increase relates to the cost of holding …show more content…
Current ratio (Current Assets / Current Liabilities) evaluates a company’s ability to meet its short-term obligations with current assets, thus it is an appropriate ratio to assess a company’ solvency. Meanwhile, the Operating Cash Flow Ratio (Cash from Operations / Current Liabilities) demonstrates to what extent a company can meet current liabilities with cash flows generated from operating activities.
Column chart 4 shows that both companies investigated have a ratio over 2 which commonly considered being a sign of great financial health. Current assets twice as large as current debts, hence this is not of critical concern to Smith & Nephew given the overall debt burden of the company. On the other hand, a high current ratio (over 4) for Zimmer Biomet does not necessarily indicate an efficient operating