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Analysis of Investments
Difficulty: Advanced
Investment Accounting Policy
Cash equivalents
Amgen considers cash equivalents to be only those investments which are highly liquid, readily convertible to cash and which mature within three months from the date of purchase.
Available-for-sale investments
Amgen considers the investment portfolio available-for-sale and, accordingly, these investments are recorded at fair value with unrealized gains and losses generally recorded in Accumulated other comprehensive income (loss) (AOCI). Investments with maturities beyond one year may be classified as short-term marketable securities in the Consolidated Balance Sheets due to their highly liquid nature and because they represent Amgen’s investments that are available for current operations.
Source: 10-K (filing date: 2018-02-13).
Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Amgen Inc., adjustment to Net Income
USD $ in millions
| 12 months ended | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | |
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| Add: Net unrealized gains (losses) on available-for-sale securities | |
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| Net income (adjusted) | |
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Based on: 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-24).
Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)
Amgen Inc., adjusted ratios
Based on: 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-24).
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Amgen Inc.’s adjusted net profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | Amgen Inc.’s adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | Amgen Inc.’s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Amgen Inc., Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-24).
2017 Calculations
1 Net profit margin = 100 × Net income ÷ Product sales
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Product sales
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Amgen Inc.’s adjusted net profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-24).
2017 Calculations
1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income ÷ Stockholders’ equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | Amgen Inc.’s adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-24).
2017 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | Amgen Inc.’s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
