Financial Statement Case
Group Project #1; 25 points
Due: Wednesday, September 15th, 2010
Requirements:
Answer the questions below using the following articles (Pfizer in Talks to Buy Wyeth, Pfizer Nears
Giant Drug Deal, and Pfizer to Pay $68 Billion for Wyeth; see E reserves link), your textbook (Chapter
1 Financial Analysis focus boxes are very helpful) and Wyeth’s 10 Q filing (see Financial Research
Skills on reverse to access Wyeth’s 10 Q filing). If you use any other source(s), please cite.
Your responses should be in complete sentences. Use one paragraph per question. You do not need
to retype the questions. Make sure to proof read your final copy.
Include a cover sheet that states title of the assignment, instructor’s name, ACCT 20100, section
number, and names of all team members. Each team member should initial his or her name to
indicate full effort in the completion of the assignment.
1.
What pharmaceutical industry factors led to the likelihood of some merger and acquisition (M&A)
activity in this sector? Focus your answer on general industry factors.
2.
Now focus on the specific decision for Pfizer and Wyeth to merge. What are those specifics? How
has the market reacted to the announcement of this business combination? In your answer,
comment on the relative reactions by shareholders of each company.
3.
How is Pfizer planning to finance this acquisition? In your answer comment on the availability of
the cash balance on its consolidated balance sheet.
4.
Refer to Wyeth’s balance sheet as of December 31, 2008 and answer the following questions:
a.
What are the three elements of a balance sheet?
b.
How are these elements related and why does this relationship exist?
c.
Which asset has the highest dollar amount?
d.
Rearrange the elements to define “net assets”; i.e., which element is the most
likely synonym for net assets?
e.
What is the dollar amount of “net assets” for Wyeth?
5.
Refer to Wyeth’s income statement.
a.
What are the two elements of an income statement and how are they related?
b.
Is Wyeth a profitable company? How do you know?
6.
Refer to Wyeth’s cash flow statement.
a.
Did Wyeth pay dividends to its shareholders? In which section of the cash flow
statement did you find this information? Explain how users of financial
statements use this section of the cash flow statement.
b.
What is Wyeth’s largest use of cash? In which section of the cash flow
statement did you find this information? Explain how users of financial
statements use this section of the cash flow statement.
7.
Refer to Wyeth’s Notes to the Financial Statements. Have Wyeth’s shareholders voted on the
merger yet? If so, what was the result?
8.
Essentially, Pfizer is buying Wyeth’s net assets. Explain why such a large difference exists
between the financial statement value of net assets and the purchase price.
Financial Research Skills: Locating Financial Information on the SEC’s Database
The Securities and Exchange Commission (SEC) regulates companies that issue stock on the stock market.
It receives financial reports from public companies electronically under a system called EDGAR (Electronic
Data Gathering and Retrieval Service). Through use of the Internet, users of financial statements may
search this database for reports that have been filed.
Follow these instructions to access the 10-Q filed by Wyeth on 08/06/2009.
1.
2.
3.
4.
5.
6.
7.
Access the EDGAR database at www.sec.gov
Click on “Search for Company Filings”; second link under Filings and Forms (Edgar)
Click on “Company or fund name, ticker symbol, CIK (Central Index Key), file number, state,
country, or SIC (Standard Industrial Classification)” (the first link)
Type in Wyeth in space for Company Name
Click “Find Companies”
Click on the “Interactive Data” oval; entry 37 of 40 entries on the first page. This will select
Wyeth’s 10-Q filed on 08/06/2009.
Note the Table of Contents on the left hand side of the page. Use the Table of Contents in order to
select the financial statements and notes you need to view to answer questions 4 - 7 (you do not
need to print out the financial statements).