Financial Management and AnalysisIndexIntroduction 3Presentation of companies 3Analysis of company ratios 5Profitability ratios 5Liquidity ratios 7Efficiency ratios 9Gear ratios 11Investment ratios 12Strengths and weaknesses of ratio analysis 14IntroductionL Financial analysis involves the use of different financial statements, which perform different functions. The basics of financial analysis consist of a balance sheet and an income statement. The income statement shows the revenues and expenses of businesses over a specific period of time, usually for a year or a half-year. The balance sheet shows the owner's assets, liabilities and net worth at a specific point in time (usually at the end of the year or half year) (http://www.accountingcoach.com/accounting-equation/explanation). Therefore we see that the company's balance sheet shows the financial health at a specific point in time and an income statement summarizes the company's profitability over time. In this report, a comparison between the two companies will be made through ratio analysis. Biotechnology products, which accounted for less than 7 percent of the revenues generated by the ten best-selling treatments worldwide in 2001, accounted for up to 71 percent of the top 10 last year. The number of biopharmaceutical medical products in clinical trials has grown 155 percent in 11 years, from 355 in 2001 to 907 in 2012, with large pharmaceutical companies involved in approximately 40 percent of all biotechnology products in development in 2012. Tufts CSDD (Center for Drug Study and Development), which examined research and development, pipeline (drugs that have entered clinical trials and are awaiting FDA approval), and sales data for three specific time points: 2002 , 2007... middle of paper... ....35Dividend Yield Ratio 0 0 0 0 0Source: Based on data from Biogen Idec Inc. Annual ReportsEarnings per share in chart (USD $)Price to Earnings Ratio (P/ E) graph Analysis of strengths and weaknesses ratio Strengths • Quantifiable and objective • Easy to do - use available information • Easy to understand – widely accepted • Easy to compare with competitors or the industry average Weaknesses • Too much mechanical: can prevent people from considering the actual situation of the company• Historical: includes historical data, not forward-looking.• If comparing data from different companies, we should be careful because accounting policies may differ.• Do not reflect market trends. • Problem of incompleteness of rational numbers. • Ignores qualitative data such as: corporate strategies, quality of management and cohesion of the board of directors.