Merck is a US pharmaceuticals company based in both USA and Canada operating under the same names. Merck is an innovative global company that is committed to improving health and well-being around the world. The company has core products that include vaccines, acute hospital care, diabetes, and cancer. However, the company focuses on the current world's killer diseases such as the antibiotic resistant infections, cancer, cardiometabolic diseases, and Alzheimer’s disease. Merck continues to invest its resources in the innovation of new drugs for the pandemics such as Ebola and other emerging diseases ( Brown, Fazzari & Petersen, 2009) .
However, the company will face issues in trying to calculate its cash flow statements. The main themes that may affect its operations include proposed projects, new venture unpredictability, working capital issues, and public relations ( Kapić, 2009) . These issues will affect the company’s operations in many ways since the new project adopted is least understood. The company will consider its past cash flow statements to predict the future change in its cash flow statements. It may be that the firm is going to face a slowdown in its operations or a sharp increase in profitability associated with the customers’ acceptance of the new product. However, for the Merck Company, its cash flow statement will drastically be affected in its new product through are initial stages.
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The company affecting its cash flow statements may underestimate Prospective Projects . While Companies estimate their cash flow statements, they in most cases target the short-term projects leaving out the long term projects in the event ( Kapić, 2009) . The company, therefore, fails to realize the true issue that is affecting its operations by looking at the short-term cash flows from its operations. Merck Company may be faced with an issue of estimating its projects based on its current income, which will be unsavory, the long-term investments of the company.
Research on cancer drugs may be a potential project for the enterprise. Finding such like a drug has been the Merck’s main objective ( Kanagaretnam, Mathieu & Shehata, 2009) . Guesses and estimates will dominate most of its activities on the project. The company will be at a dilemma of investing with significant uncertainty guesses surrounding the work. Therefore, the company may adopt a product margin that might be too low for it to realize profits or may set high prices for its products so high that its income is affected. It is known that owners of companies underestimate cash outflows and overestimate cash inflows, which makes it tough to estimate cash flows of the enterprise.
Merck Company is an international company with branches in various countries. The parent company is in the US while others including its subsidiaries are located overseas ( Brown, Fazzari & Petersen, 2009) . The company produces both human and animal drugs. The company has invested so much in the innovation of human drugs especially in fighting the current emerging diseases. Therefore, in the company’s projects, which include innovation in medicines for current diseases and enabling faster access to the drug by the sick, are among many that the company aims in the future. The company uses a fraction of its finances from its revenues that total to $39 billion to implement its new projects. Sourcing finances from the business seem the most appropriate to start new risky projects that other financial sources might not provide funding.
Reference
Brown, J. R., Fazzari, S. M., & Petersen, B. C. (2009). Financing innovation and growth: Cash flow, external equity, and the 1990s R&D boom. The Journal of Finance , 64 (1), 151-185.
Kanagaretnam, K., Mathieu, R., & Shehata, M. (2009). Usefulness of comprehensive income reporting in Canada. Journal of Accounting and Public Policy , 28 (4), 349-365.
Kapić, J. (2009). Cash flow statements. Economic analysis , 42 (3-4), 38-49.
