.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: Amgen Inc., Annual Report
Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Amgen Inc., adjustment to Net Income
USD $ in millions
Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)
Amgen Inc., adjusted ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Net Profit Margin | ||||||
| | Reported net profit margin | % | % | % | % | % |
| | Adjusted net profit margin | % | % | % | % | % |
| Return on Equity (ROE) | ||||||
| | Reported ROE | % | % | % | % | % |
| | Adjusted ROE | % | % | % | % | % |
| Return on Assets (ROA) | ||||||
| | Reported ROA | % | % | % | % | % |
| | Adjusted ROA | % | % | % | % | % |
| 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. |
Adjusted Net Profit Margin
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net income (USD $ in millions) | |||||
| | Product sales (USD $ in millions) | |||||
| | Net profit margin1 | % | % | % | % | % |
| Adjusted: Mark to Market Available-for-sale Securities | ||||||
| | Adjusted net income (USD $ in millions) | |||||
| | Product sales (USD $ in millions) | |||||
| | Adjusted net profit margin2 | % | % | % | % | % |
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)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net income (USD $ in millions) | |||||
| | Stockholders' equity (USD $ in millions) | |||||
| | ROE1 | % | % | % | % | % |
| Adjusted: Mark to Market Available-for-sale Securities | ||||||
| | Adjusted net income (USD $ in millions) | |||||
| | Stockholders' equity (USD $ in millions) | |||||
| | Adjusted ROE2 | % | % | % | % | % |
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)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net income (USD $ in millions) | |||||
| | Total assets (USD $ in millions) | |||||
| | ROA1 | % | % | % | % | % |
| Adjusted: Mark to Market Available-for-sale Securities | ||||||
| | Adjusted net income (USD $ in millions) | |||||
| | Total assets (USD $ in millions) | |||||
| | Adjusted ROA2 | % | % | % | % | % |
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. |
