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Memorandum

To: Gail Yosh, President, Quanta Communications

From: Jane Smith

Date: May 2, 2016

Subject: Business Valuation Analysis

During our April 29th meeting, you asked me to review the compiled data on the pharmaceutical industry and its main competitors. I conducted an analysis of the data, and I believe it will be very beneficial as we work with our newest client, ABC Pharmaceuticals.

Entitled ‘Business Valuation Study,’ the data set contains information pertaining to 71 companies in the pharmaceutical industry. Each company is categorically organized by its name, type, and stock exchange reference. Information pertaining to Debt/EBITA Ratio and Ratio Level is additionally provided. The data set also shows the continuous variables of each company with Price/Book Value Ratios, PE Ratios, Assets, Return on Equity, and Growth Percentages. Although it is not indicated where the data came from, it can be inferred that it was compiled with the use of company’s public financial records and through other financial information databases.

Chart 1, attached in the Appendix on the following page, displays the Debt/EBITDA Ratio of the companies by type, either Pharmaceutical Preparation or Biological Products. This ratio measures a company’s ability to pay off incurred debts, and is highly valuable in providing investors an estimated time needed for a particular company to pay off such debts. Table 1 displays statistical data for the ROE of both types of companies. This reveals a higher mean ROE for BioProducts (29.2 to 20.7), as well as a higher maximum ROE (133 to 91.5). This indicates to investors the chance of higher returns with BioProducts companies. However, the standard deviation of this company type, at roughly 28.9, is higher than PharmPrep’s 16.28 standard deviation. This indicates to investors that BioProducts companies have greater variation, and perhaps greater unpredictability, opposed to the more steady patterns with the latter.

ABC Pharmaceuticals has contracted Quanta Communications to aid in both internal and external public relations. This information is excellent for understanding the competitive landscape of the overall pharmaceutical industry, as well as for understanding how potential investors may view our client as opposed to other pharmaceutical investment options. With this data, particularly the Debt/EDBITDA and ROE information, we will have a stronger foundation as we improve communications between ABC Pharmaceuticals and its current or potential investors. Additionally, this in depth look at the financial makeup of the industry will aid us in accurately conveying information to employees and the general public.

Please do not hesitate to contact me with any comments or questions regarding the above information and analysis. I would also be happy to conduct additional research upon your request.

Appendix

Chart 1 – Type Co. and Debt/EBITDA Ratio

Table 1 – ROE and Type Co.