Microsoft Excel LibreOffice Calc

Abbott Laboratories (ABT)


Analysis of Goodwill and Intangible Assets

High level of difficulty


Adjustments to Financial Statements: Removal of Goodwill

Abbott Laboratories, adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Total Assets
Total assets (as reported) 67,173  76,250  52,666  41,247  41,275 
Less: Goodwill 23,254  24,020  7,683  9,638  10,067 
Total assets (adjusted) 43,919  52,230  44,983  31,609  31,208 
Adjustment to Total Abbott Shareholders’ Investment
Total Abbott shareholders’ investment (as reported) 30,524  30,897  20,538  21,211  21,526 
Less: Goodwill 23,254  24,020  7,683  9,638  10,067 
Total Abbott shareholders’ investment (adjusted) 7,270  6,877  12,855  11,573  11,459 

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-27).


Abbott Laboratories, Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

Abbott Laboratories, adjusted financial ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total Asset Turnover
Reported total asset turnover 0.46 0.36 0.40 0.49 0.49
Adjusted total asset turnover 0.70 0.52 0.46 0.65 0.65
Financial Leverage
Reported financial leverage 2.20 2.47 2.56 1.94 1.92
Adjusted financial leverage 6.04 7.59 3.50 2.73 2.72
Return on Equity (ROE)
Reported ROE 7.76% 1.54% 6.82% 20.85% 10.61%
Adjusted ROE 32.57% 6.94% 10.89% 38.22% 19.93%
Return on Assets (ROA)
Reported ROA 3.53% 0.63% 2.66% 10.72% 5.53%
Adjusted ROA 5.39% 0.91% 3.11% 13.99% 7.32%

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-27).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Abbott Laboratories’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018.
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.
Abbott Laboratories’s adjusted financial leverage ratio increased from 2016 to 2017 but then slightly declined from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Abbott Laboratories’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Abbott Laboratories’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Abbott Laboratories, Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net sales 30,578  27,390  20,853  20,405  20,247 
Total assets 67,173  76,250  52,666  41,247  41,275 
Activity Ratio
Total asset turnover1 0.46 0.36 0.40 0.49 0.49
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net sales 30,578  27,390  20,853  20,405  20,247 
Adjusted total assets 43,919  52,230  44,983  31,609  31,208 
Activity Ratio
Adjusted total asset turnover2 0.70 0.52 0.46 0.65 0.65

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 30,578 ÷ 67,173 = 0.46

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 30,578 ÷ 43,919 = 0.70

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Abbott Laboratories’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets 67,173  76,250  52,666  41,247  41,275 
Total Abbott shareholders’ investment 30,524  30,897  20,538  21,211  21,526 
Solvency Ratio
Financial leverage1 2.20 2.47 2.56 1.94 1.92
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets 43,919  52,230  44,983  31,609  31,208 
Adjusted total Abbott shareholders’ investment 7,270  6,877  12,855  11,573  11,459 
Solvency Ratio
Adjusted financial leverage2 6.04 7.59 3.50 2.73 2.72

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Abbott shareholders’ investment
= 67,173 ÷ 30,524 = 2.20

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Abbott shareholders’ investment
= 43,919 ÷ 7,270 = 6.04

Solvency 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.
Abbott Laboratories’s adjusted financial leverage ratio increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Adjusted Return on Equity (ROE)

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings 2,368  477  1,400  4,423  2,284 
Total Abbott shareholders’ investment 30,524  30,897  20,538  21,211  21,526 
Profitability Ratio
ROE1 7.76% 1.54% 6.82% 20.85% 10.61%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net earnings 2,368  477  1,400  4,423  2,284 
Adjusted total Abbott shareholders’ investment 7,270  6,877  12,855  11,573  11,459 
Profitability Ratio
Adjusted ROE2 32.57% 6.94% 10.89% 38.22% 19.93%

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-27).

2018 Calculations

1 ROE = 100 × Net earnings ÷ Total Abbott shareholders’ investment
= 100 × 2,368 ÷ 30,524 = 7.76%

2 Adjusted ROE = 100 × Net earnings ÷ Adjusted total Abbott shareholders’ investment
= 100 × 2,368 ÷ 7,270 = 32.57%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Abbott Laboratories’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings 2,368  477  1,400  4,423  2,284 
Total assets 67,173  76,250  52,666  41,247  41,275 
Profitability Ratio
ROA1 3.53% 0.63% 2.66% 10.72% 5.53%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net earnings 2,368  477  1,400  4,423  2,284 
Adjusted total assets 43,919  52,230  44,983  31,609  31,208 
Profitability Ratio
Adjusted ROA2 5.39% 0.91% 3.11% 13.99% 7.32%

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-27).

2018 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × 2,368 ÷ 67,173 = 3.53%

2 Adjusted ROA = 100 × Net earnings ÷ Adjusted total assets
= 100 × 2,368 ÷ 43,919 = 5.39%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Abbott Laboratories’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.