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Bitter Pill F - Christopher Varacchi Sam Kaiser Devon...

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Christopher Varacchi Sam Kaiser Devon Reilly Katie Clarke Brad Berkowitz Bitter Pill F In September 2004, Vioxx underwent recall and had a significant effect on Merck from a financial perspective. The changes for Merck’s financial conditions can be reflected through ratio analysis. The difference between before and after recall will show the changes that took place on the company’s financial conditions. Liquidity Ratios: Most companies use two types of liquidity ratios which include current and acid-test. The current ratio for Merck was 1.2 in 2003 and increased to 1.58 in 2005. The acid-test ratio for Merck was .86 in 2003 and 1.40 in 2005. Basically, the increase of cash and cash equivalents was reflected in the ratios by saving money from the recall of their products. Merck obtained the ability to convert assets into cash at a faster level. These ratios show that Merck was not a safe risk for granting short term credit, but will now be able to pay off their short term d measures how fast as an asset can be converted to cash.
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