Merck & Co. Inc. (MRK)

Inventory Accounting Policy

Inventories are valued at the lower of cost or market. The cost of a substantial majority of domestic pharmaceutical and vaccine inventories is determined using the last-in, first-out ("LIFO") method for both financial reporting and tax purposes. The cost of all other inventories is determined using the first-in, first-out ("FIFO") method. Inventories consist of currently marketed products and certain products awaiting regulatory approval. In evaluating the recoverability of inventories produced in preparation for product launches, Merck considers the probability that revenue will be obtained from the future sale of the related inventory together with the status of the product within the regulatory approval process.

Source: Merck & Co. Inc., Annual Report

Inventory Disclosure

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Merck & Co. Inc., Statement of Financial Position, Inventory

USD $ in millions

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Finished goods
	Raw materials and work in process
	Supplies
	Inventories, approximates current cost
	Reduction to LIFO costs
	Inventories
	Less: Inventories recognized as other assets
	Inventories (excludes inventories classified in other assets)

Source: Based on data from Merck & Co. Inc. Annual Reports

Item	Description	The company
Finished goods	Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale.	Merck & Co. Inc.'s finished goods declined from 2009 to 2010 but then increased from 2010 to 2011 not reaching 2009 level.
Raw materials and work in process	The aggregate carrying amount as of the balance sheet date of items held by the entity which are partially completed at the time of measurement and unprocessed items that will go through the production process and become part of the final product. Includes supplies used directly or indirectly in the manufacturing or production process. This element may be used when the reporting entity combines work in process and raw materials into an aggregate amount.	Merck & Co. Inc.'s raw materials and work in process declined from 2009 to 2010 and from 2010 to 2011.
Supplies	Carrying amount as of the balance sheet date of products used directly or indirectly in the manufacturing or production process, which may or may not become part of the final product. May also include items used in the storage, presentation or transportation of physical goods.	Merck & Co. Inc.'s supplies declined from 2009 to 2010 and from 2010 to 2011.
Inventories (excludes inventories classified in other assets)	Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer).	Merck & Co. Inc.'s inventories (excludes inventories classified in other assets) declined from 2009 to 2010 but then slightly increased from 2010 to 2011.

Adjustment to Inventory: from LIFO to FIFO

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Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Adjustment to Inventories (excludes Inventories Classified In Other Assets)
	Inventories (excludes inventories classified in other assets) at LIFO (as reported)
	Add: LIFO reserve, ending balance
	Inventories (excludes inventories classified in other assets) at FIFO (adjusted)
	Adjustment to Current Assets
	Current assets (as reported)
	Add: LIFO reserve, ending balance
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Add: LIFO reserve, ending balance
	Total assets (adjusted)
	Adjustment to Merck & Co., Inc. Stockholders’ Equity
	Merck & Co., Inc. stockholders’ equity (as reported)
	Add: LIFO reserve, ending balance
	Merck & Co., Inc. stockholders’ equity (adjusted)
	Adjustment to Net Income Attributable To Merck & Co., Inc.
	Net income attributable to Merck & Co., Inc. (as reported)
	Add: Increase (decrease) in LIFO reserve, ending balance
	Net income attributable to Merck & Co., Inc. (adjusted)

Merck & Co. Inc.'s inventory value on Dec 31, 2011 would be $6,297 (in millions) if the FIFO inventory method was used instead of LIFO. Merck & Co. Inc.'s inventories, valued on a LIFO basis, on Dec 31, 2011 were $6,254 . Merck & Co. Inc.'s inventories would have been $43 higher than reported on Dec 31, 2011 if the FIFO method had been used instead.

Adjusted Ratios: LIFO vs. FIFO (Summary)

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Merck & Co. Inc., adjusted ratios

	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
Current Ratio
Reported current ratio (LIFO)
Adjusted current ratio (FIFO)
Net Profit Margin
Reported net profit margin (LIFO)	%	%	%	%	%
Adjusted net profit margin (FIFO)	%	%	%	%	%
Total Asset Turnover
Reported total asset turnover (LIFO)
Adjusted total asset turnover (FIFO)
Financial Leverage
Reported financial leverage (LIFO)
Adjusted financial leverage (FIFO)
Return on Equity (ROE)
Reported ROE (LIFO)	%	%	%	%	%
Adjusted ROE (FIFO)	%	%	%	%	%
Return on Assets (ROA)
Reported ROA (LIFO)	%	%	%	%	%
Adjusted ROA (FIFO)	%	%	%	%	%

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Merck & Co. Inc.'s adjusted current ratio improved from 2009 to 2010 and from 2010 to 2011.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Merck & Co. Inc.'s adjusted net profit margin deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Merck & Co. Inc.'s adjusted total asset turnover improved from 2009 to 2010 and from 2010 to 2011.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Merck & Co. Inc.'s adjusted financial leverage increased from 2009 to 2010 but then slightly declined from 2010 to 2011.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	Merck & Co. Inc.'s adjusted ROE deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Merck & Co. Inc.'s adjusted ROA deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.

Adjusted Current Ratio

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		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Current assets (USD $ in millions)
	Current liabilities (USD $ in millions)

	Current ratio¹
	Adjusted: from LIFO to FIFO
	Adjusted current assets (USD $ in millions)
	Current liabilities (USD $ in millions)

	Adjusted current ratio²

2011 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= ÷ =

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= ÷ =

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Merck & Co. Inc.'s adjusted current ratio improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Net Profit Margin

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to Merck & Co., Inc. (USD $ in millions)
Sales (USD $ in millions)

Net profit margin¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Merck & Co., Inc. (USD $ in millions)
Sales (USD $ in millions)

Adjusted net profit margin²	%	%	%	%	%

2011 Calculations

¹ Net profit margin = 100 × Net income attributable to Merck & Co., Inc. ÷ Sales
= 100 × ÷ = %

² Adjusted net profit margin = 100 × Adjusted net income attributable to Merck & Co., Inc. ÷ Sales
= 100 × ÷ = %

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Merck & Co. Inc.'s adjusted net profit margin deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.

Adjusted Total Asset Turnover

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		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Sales (USD $ in millions)
	Total assets (USD $ in millions)

	Total asset turnover¹
	Adjusted: from LIFO to FIFO
	Sales (USD $ in millions)
	Adjusted total assets (USD $ in millions)

	Adjusted total asset turnover²

2011 Calculations

¹ Total asset turnover = Sales ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Sales ÷ Adjusted total assets
= ÷ =

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Merck & Co. Inc.'s adjusted total asset turnover improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Financial Leverage

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		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Total assets (USD $ in millions)
	Merck & Co., Inc. stockholders’ equity (USD $ in millions)

	Financial leverage¹
	Adjusted: from LIFO to FIFO
	Adjusted total assets (USD $ in millions)
	Adjusted merck & Co., Inc. stockholders’ equity (USD $ in millions)

	Adjusted financial leverage²

2011 Calculations

¹ Financial leverage = Total assets ÷ Merck & Co., Inc. stockholders’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted merck & Co., Inc. stockholders’ equity
= ÷ =

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Merck & Co. Inc.'s adjusted financial leverage increased from 2009 to 2010 but then slightly declined from 2010 to 2011.

Adjusted Return On Equity (ROE)

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to Merck & Co., Inc. (USD $ in millions)
Merck & Co., Inc. stockholders’ equity (USD $ in millions)

ROE¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Merck & Co., Inc. (USD $ in millions)
Adjusted merck & Co., Inc. stockholders’ equity (USD $ in millions)

Adjusted ROE²	%	%	%	%	%

2011 Calculations

¹ ROE = 100 × Net income attributable to Merck & Co., Inc. ÷ Merck & Co., Inc. stockholders’ equity
= 100 × ÷ = %

² Adjusted ROE = 100 × Adjusted net income attributable to Merck & Co., Inc. ÷ Adjusted merck & Co., Inc. stockholders’ equity
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	Merck & Co. Inc.'s adjusted ROE deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.

Adjusted Return On Assets (ROA)

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to Merck & Co., Inc. (USD $ in millions)
Total assets (USD $ in millions)

ROA¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Merck & Co., Inc. (USD $ in millions)
Adjusted total assets (USD $ in millions)

Adjusted ROA²	%	%	%	%	%

2011 Calculations

¹ ROA = 100 × Net income attributable to Merck & Co., Inc. ÷ Total assets
= 100 × ÷ = %

² Adjusted ROA = 100 × Adjusted net income attributable to Merck & Co., Inc. ÷ Adjusted total assets
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Merck & Co. Inc.'s adjusted ROA deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.

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Merck & Co. Inc. (MRK) | Analysis of Inventory

Inventory Accounting Policy

Inventory Disclosure

Adjustment to Inventory: from LIFO to FIFO

Adjusted Ratios: LIFO vs. FIFO (Summary)

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return On Equity (ROE)

Adjusted Return On Assets (ROA)

In order to obtain free access to...

...this page

...the analysis of Merck & Co.(data of only one company could be available for free)

Merck & Co. Inc. (MRK) | Analysis of Inventory

Inventory Accounting Policy

Inventory Disclosure

Adjustment to Inventory: from LIFO to FIFO

Adjusted Ratios: LIFO vs. FIFO (Summary)

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return On Equity (ROE)

Adjusted Return On Assets (ROA)

...the analysis of Merck & Co.
(data of only one company could be available for free)