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Medtronic PLC (MDT)
Analysis of Investments
Difficulty: Advanced
Investment Accounting Policy
Medtronic invests in marketable debt and equity securities, investments that do not have readily determinable fair values, and investments accounted for under the equity method.
Marketable debt securities are classified and accounted for as available-for-sale. These investments are recorded at fair value in the consolidated balance sheets. The change in fair value for available-for-sale securities is recorded, net of taxes, as a component of accumulated other comprehensive loss on the consolidated balance sheets. Medtronic determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. The classification of marketable debt securities as current or long-term is based on the nature of the securities and the availability for use in current operations consistent with Medtronic’s management of its capital structure and liquidity.
Certain of Medtronic’s investments in marketable equity securities and other securities are long-term, strategic investments in companies that are in various stages of development and are included in other assets on the consolidated balance sheets. Marketable equity securities are recorded at fair value in the consolidated balance sheets. The change in fair value of marketable equity securities is recognized within other non-operating income, net in the consolidated statements of income. Investments without readily determinable fair values that do not qualify for the practical expedient to estimate fair value using the net asset value per share or its equivalent are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the issuer. This election is made for each investment separately and is reassessed at each reporting period as to whether the investment continues to qualify for this election. At each reporting period, Medtronic makes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. Equity securities accounted for under the equity method are initially recorded at the amount of Medtronic’s investment and are adjusted each period for Medtronic’s share of the investee’s income or loss and dividends paid. Securities accounted for under the equity method are reviewed quarterly for changes in circumstance or the occurrence of events that suggest Medtronic’s investment may not be recoverable.
Source: 10-K (filing date: 2019-06-21).
Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Medtronic PLC, adjustment to Net Income Attributable To Medtronic
USD $ in millions
Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).
Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)
Medtronic PLC, adjusted ratios
Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Medtronic PLC’s adjusted net profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | Medtronic PLC’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | Medtronic PLC’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level. |
Medtronic PLC, Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).
2019 Calculations
1 Net profit margin = 100 × Net income attributable to Medtronic ÷ Net sales
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income attributable to Medtronic ÷ Net sales
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Medtronic PLC’s adjusted net profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).
2019 Calculations
1 ROE = 100 × Net income attributable to Medtronic ÷ Shareholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income attributable to Medtronic ÷ Shareholders’ equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | Medtronic PLC’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).
2019 Calculations
1 ROA = 100 × Net income attributable to Medtronic ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income attributable to Medtronic ÷ Total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | Medtronic PLC’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level. |