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Percentage change for financial statements

Forest Lab was referred to at the beginning of the chapter as a firm that had an attractive valuation in the marketplace. Go to its website at www.frx.com, and follow the step below:

1. Click on "Investor Relations,"

2. Under financial highlights, compute the percentage change for the following items from the first to the last year. You should see four years of data.
a. Net Revenues.
b. Net Income.
c. Earnings per common and common share equivalent.
d. On an annual basis, a healthy number of any of these three items is 10 percent per year. Using a calculator, divide the latest figure by the earliest figure. Go to Appendix A at the back of your text for n=3 and see what interest rate the figure you calculated is closest to. That will give you an approximation of the annual rate of growth.
How does that figure compare to an annual 10 percent growth rate?

3. Now click on "Financial Reports."

4. Then click on "An Expanding Product Portfolios." Scroll down to look at "Pipeline at a Glance." This is the lifeblood of the drug industry (no pun intended). Write a one paragraph, nontechnical description of new developments.

5. Return to the prior page and clock on "Financial Statements."

6. Scroll down to "Consolidated Statements of Income." Before you do any calculations, be aware that successful drug companies put at least five percent of net sales into research and development.
For the three years shown, what is the ratio of research and development to net sales for Forest Labs? In this firm above or below the five percent standard in each year?

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Solution Preview

Nontechnical description of new developments.

Forest Laboratories is a highly successful developer, manufacturer and marketer of ethical branded and generic pharmaceutical products. Over the past several years, Forest's success in the antidepressant market combined with the strong performance of products for hypertension and asthma has enabled the Company to build a strong, diverse pipeline-the wellspring for future growth. The Research and development expense increased $59,743 in fiscal year 2005 and $29,033 in fiscal
year 2004. This spending is on an average more than 9% of net sales (See attached excel sheet) every year. ...

Solution Summary

This explains the percentage change of financial statements