Liquidity Ratios Attempt to Measure a Company's Ability

Liquidity Ratio:

Ratio 2015 2014 2013

Liquidity Ratio 1.00 1.01 4.08

Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations. This is done by comparing a company's most liquid assets, cash and equivalents to its short-term liabilities. The company has liquidity ratio of 1 in 2015 and 2014, however its value is 4.08 in 2013. So Pfizer has huge liquid assets in 2013 as compared to its short term obligations. However the company has used its cash and equivalents to pay the dividend of 360 per share in 2014 which led to reduction in cash and equivalent which is just enough to pay its short term obligations.

Cash flow yield:

Ratio 2015 2014 2013

Cash Flow Yield 1.81 1.00 0.18

It is a financial ratio that measures how well a company generates cash from its current operations. Calculate cash flow yield by subtracting net cash flow from operating activities and dividing the resulting number by net income. This ratio measures a company’s cash-generating efficiency using cash flow. Company has sold its animal health business and investment in subsidiary due to which the operating efficiency has increased which in turn increased the cash flow yield in 2014. Also the declaration of dividend has a positive impact on cash flow yield.

Debt to Equity Ratio:

Ratio 2015 2014 2013

Debt-Equity Ratio 0.016288 0.022617 0.00836

The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of shareholders’ equity. It also indicates how well creditors are protected in case of the company's insolvency. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. Aggressive leveraging practices are often associated with high levels of risk. This may result in volatile earnings as a result of the additional interest expense.

D/E ratio for Pfizer Inc. is low. It has increased in 2014 as compared to 2013 figures however decreased again in 2015 as compared to 2014 figures. One can easily interpret that company is not financing its growth with debt. However looking at balance sheet one can understand that the liabilities has doubled in 2015 however the shareholder’s fund tripled due to which D/E ratio has decreased.

Ratio 2015 2014 2013

Debt-Asset Ratio 0.016 0.022 0.008

Debt to Asset Ratio:

The debt to assets ratio indicates the proportion of a company's assets that are being financed with debt, rather than equity. A ratio greater than 1 also indicates that a company may be putting itself at risk of not being able to pay back its debts. Although the D/A ratio has decreased in 2015, the company’s equity has increased many fold which in turn indicates that Pfizer is in good financial condition. The company is able to absorb asset reductions arising from losses without jeopardizing the interest of creditors.

Total Leverage Ratio:

Ratio 2015 2014 2013

Total Leverage Ratio 1.016288 1.022617 1.00836

The total leverage ratio makes the user to estimate the increase in operating profits on account of leverage from debt funds. Since Pfizer is not a debt oriented company, the leverage effect on the performance of the company is quite small. It is just 1.01 times the actual performance. The company has scope of maximizing the leverage effect in the future.

Interest Coverage Ratio:

Ratio 2015 2014 2013

Interest

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