*Table 1.”Financial ratios for Merck(MRK) for years 2005-2007”(*numbers in millions*, excluding per share items*) *DSO=365/receivable turnover The moneycentral.com used the formula "cost of goods sold/average inventory *EBIT=Income before tax+Interest Expense, Suplemental In the following project analysis I will compute and analyze the financial ratios for Merck for years 2005-2007 and compare them to the ratios for the last 12 months, also with the ratios within the industry. If we’ll look at the primary liquidity ratio analyzed for companies we can remark the current ratio for Merck have had a decreasing trend during the period 2005-2007 from 1.56x in 2005 to 1.23x in 2007 with a big diminution in 2006 to 1.20x (Table 1). That means that current liabilities increased with a faster rhythm than current assets and we can say that Merck is still able to pay its current debt by liquidating the current assets at even 83% (1/1.2) of their fair value but the negative trend, especially the big fall of this ratio in 2006 should draw the attention of both – investors and managers. If comparing to the industry average for the last 12 months we can see that Merck have a relatively weak position within the industry with 1.3x vs. 1.8x. This is one more sign that managers should pay attention at the company’s ability to meet the current debt payments and limit somehow the current liabilities. If we’ll analyze the company’s quick liquidity ratio, which means the company’s ability to honor its current debts without implying inventories – the least liquid current asset, we can see that that Merck had a ratio of 1.46x in 2005 an it has followed the same trend as current ratio – a big fall in 2006 to 1.06x and a slightly recover in 2007 to 1.07x. We can imply based on these results that Merck have had a strike in 2006 that affected somehow its financial health by diminishing its current assets positions with the emphasize on cash and short term investment positions. If...