SummaryCardinal Health Inc. (NYSE: CAH) ranks among the industry leaders in the medical supplies market. However, recent financial performance suggests challenges for Cardinal Health. In addition to the recently passed Patient Care and Affordability Act, Cardinal Heath underwent significant changes in fiscal year 2010. An analysis of several key financial ratios offers mixed results. The divestiture of Care Fusion, Inc. and the acquisition of pharmaceutical companies strengthening Cardinal's portfolio highlighted these changes. During challenging economic times, Cardinal Health was able to grow revenue by 3%, increase inventory turns and maintain an industry-leading cash conversion cycle. However, profit margins continue to decline amid falling profits. Efficiency ratios indicate how well a company uses its assets. This efficient use of inventory leads to resourceful cash conversion, especially important in a low-margin industry. Favorable inventory utilization benefits Cardinal Health, which faces some pricing pressure in 2011. Cardinal Health continues to rank among the leaders in the medical supplies industry with an inventory turnover ratio of 14.0, compared to 13.5 during the 2009 financial year (financial.morningstar.com). In comparison, rival McKesson Corporation's inventory turnover in 2009 was 11.5, while AmerisourceBergen's inventory turnover was 14.8. An inventory-to-sales ratio of 6.5 and an asset turnover ratio of 4.4 further support the efficient utilization of inventory and assets compared to leading competitors (advfn.com). In addition to efficient use of cash, Cardinal Health maintains a receivables turnover ratio of 18.2 in fiscal 2010, down slightly from 18.7 in 2009 (advfn.com) . Compared to their closest competitor... middle of paper ...... additional demographics and policyholders bode well for Cardinal Health's future. Controlling costs and strengthening sales of high-margin products will help Cardinal Health increase profits and increase shareholder returns.Works CitedAdvfn.com. Retrieved December 1, 2010 from http://www.advfn.com/p.php?pid=financials&btn=s_ok&mode=company_data&symbol=NYSE%3AomiFinancials.Morningstar.com. Retrieved December 2, 210 from http://financials.morningstar.com/ratios/r.html?t=MCKMueller, J. (2010). How much do you use Cash Cardinal Health? Retrieved December 1, 2010 from http://www.fool.com/investing/general/2010/08/23/how-well-do-you-use-cash-cardinal-health.aspxRoss, S., Westerfield, R ., and Jordan, B. (2010). Fundamentals of business finance. New York: McGraw Hill. Yahoo.com. Retrieved December 3, 2010 from http://finance.yahoo.com/q/ks?s=CAH+Key+Statistics