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Sub- Financial Strategies Creation Analyse Case Immulogic Essay

Sub- Financial strategies creation Analyse case ImmuLogic pharmaceutical corporation - a consultant .Write report/analysis & 3 pages calculation ImmuLogic Pharmaceutical Corporation

ImmuLogic Pharmaceutical Corporation is a relatively novel firm, with only four years of experience within the market. The organization nevertheless possesses increased potential and has decided in favor of going public in an effort to generate an expected $80 million in capital. Still, in a context in which the firm does not yet have a commercially viable product -- and this would take an additional four years -- a question is being posed relative to the future sustainability of the initial public offering. In other words, the company's executives now wonder whether or not they should proceed with the IPO, or whether they should withdraw it.

The offering of such an answer is an intricate endeavor, and it would be based on a multitude of aspects. At the initial level however, the analysis would rely on objective quantitative features, which are conducted through numerical data and which lead to relevant and unbiased conclusions (Balnaves and Caputi, 2001). Namely, at this stage, several financial computations would be completed in order to assess the financial strength of the ImmuLogic Pharmaceutical Corporation. In order to complete these computations, the data used would be collected from the financial statements of the firm.

a) Quick ratio

Quick ratio = ( Current assets -- Inventories ) / Current liabilities

Note: Since the ImmuLogic Pharmaceutical Corporation does not have a commercially viable product, its inventories are assumed at zero.

Quick ratio = Current assets / Current liabilities

Quick ratio in 1989 = 20,466 / 877 = 23.34

Quick ratio in 1990 = 15,142 / 890 = 17.01

The quick ratio portrays the company's short-term liquidity, better yet said, its ability to pay its short-term obligations with its most liquid assets (Investopedia, 2012). The computation of two ratios reveals that the company has decreased its ability to pay its short-term debts in 1990 relative to...

As the computations have revealed, the pharmaceutical company has encountered a decrease in its ability to honor its short-term obligations in 1990 relative to the previous year.
c) Asset turnover

Asset turnover = Revenues / Total assets

Asset turnover in 1989 = - 3,145 / 24,128 = - 0.13

Asset turnover in 1990 = - 6,043 / 18,604 = - 0.32

From this ratio, it becomes obvious that the company's financial results have suffered significant contractions in 1990 relative to 1989. The organization registered a massive decrease in assets, but also a doubling of its financial results, to further deepen the net losses. These financial results are explained by the fact that the company is still researching and investing in the product, having yet to capitalize on its investments. Still, at this rate, the financial sustainability of the organization is questionable.

At the specific level of the asset turnover ratio, this is indicative of the company's ability to use its assets to generate sales, and subsequently, profits (Asset Turnover, 2011). At the level of the ImmuLogic Pharmaceuticals Corporation, this ability has decreased significantly from 1989 to 1990, the company revealing a severely decreased ability to use its assets to create positive financial results.

d) Return on assets

The return on asset ratio is traditionally computed by dividing the net income by the total assets. In the specific case of the ImmuLogic Pharmaceutical Corporation, the return on assets equals the…

Sources used in this document:
References:

Balnaves, M., Caputi, P., 2001, Introduction to quantitative research methods: an investigative approach, SAGE, ISBN 0761968040

Lerner, J., 1992, ImmuLogic Pharmaceutical Corporation, Harvard Business School

2011, Asset turnover definition, Asset Turnover, http://www.asset-turnover.org / last accessed on February 6, 2012

2012, Investopedia, http://www.investopedia.com / last accessed on February 6, 2012
Equity finance, Business Link, http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073789573&type=RESOURCES last accessed on February 6, 2012
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