#### The Company Profile

Basic information about Danaher Corp.

## Financial Statements

#### Income Statement

The income statement (statement of earnings) reports on the performance of Danaher Corp., the result of its operating activities.

#### Statement of Comprehensive Income

Comprehensive income is the change in equity (net assets) of Danaher Corp. during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

#### Balance Sheet: Assets

The assets reports major classes and amounts of resources owned or controlled by Danaher Corp..

#### Balance Sheet: Liabilities and Stockholders’ Equity

The liabilities and stockholders’ equity reports major classes and amounts of external claims on assets and owners’ capital contributions, and other internally generated sources of capital.

#### Cash Flow Statement

The cash flow statement provides information about Danaher Corp.’s cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on Danaher Corp.’s balance sheet.

## Common-Size Financial Statements

#### Common-Size Income Statement

Income statement components (revenues and expenses) shown as percentage of total sales.

#### Common-Size Balance Sheet: Assets

Assets components shown as percentage of total assets.

#### Common-Size Balance Sheet: Liabilities and Stockholders’ Equity

Liabilities and stockholders’ equity components shown as percentage of total liabilities and stockholders’ equity.

## Analysis of Financial Ratios

#### Analysis of Short-term (Operating) Activity Ratios

Evaluates revenues and output generated by the Danaher Corp.’s assets. Operating performance ratios describe the relationship between the Danaher Corp.’s level of operations and the assets needed to sustain operating activities.

#### Analysis of Long-term (Investment) Activity Ratios

Measures how efficiently Danaher Corp. generates revenues from its investments in fixed or total assets.

#### Analysis of Liquidity Ratios

Measures the adequacy of Danaher Corp.’s cash resources to meet its near-term cash obligations.

#### Analysis of Solvency Ratios

Examines Danaher Corp.’s capital structure in terms of the mix of its financing sources and the ability of the firm to satisfy its longer-term debt and investment obligations.

#### Analysis of Profitability Ratios

Measures the income of Danaher Corp. relative to its revenues and invested capital.

#### DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin

An approach to decomposing Danaher Corp.’s return on equity, return on assets, and net profit margin ratio as the product of other financial ratios.

## Relative Valuation

#### Common Stock Valuation Ratios

Relative valuation technique determine the value of Danaher Corp. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock’s value, such as earnings, book value, and sales.

#### Enterprise Value (EV)

Enterprise value is total company value (the market value of common equity, debt, and preferred equity) minus the value of cash and short-term investments.

#### Enterprise Value to EBITDA (EV/EBITDA)

To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital.

#### Enterprise Value to FCFF (EV/FCFF)

Free cash flow to the firm is the cash flow available to the Danaher Corp.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.

#### Price to FCFE (P/FCFE)

Free cash flow to equity is the cash flow available to Danaher Corp.’s equity holders after all operating expenses, interest, and principal payments have been paid and necessary investments in working and fixed capital have been made.

## Discounted Cash Flow (DCF) Valuation

#### Capital Asset Pricing Model (CAPM)

CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.

#### Dividend Discount Model (DDM)

The dividend discount model (DDM) is a technique for estimating the value of a share of Danaher Corp.’s common stock issue as the present value of all future dividends.

#### Present Value of Free Cash Flow to the Firm (FCFF)

The FCFF valuation approach estimates the value of the firm as the present value of future FCFF discounted at the weighted average cost of capital (WACC).

#### Present Value of Free Cash Flow to Equity (FCFE)

The FCFE valuation approach estimates the value of equity as the present value of future FCFE discounted at the required rate of return on equity.

## Economic Value Added (EVA)

#### Economic Value Added (EVA)

Internal management performance measure that compares net operating profit after taxes to total cost of capital. Indicates how profitable Danaher Corp. projects are as a sign of management performance.

#### Return on Capital (ROC)

Return on capital (ROC) is after tax rate of return on net business assets.

#### Market Value Added (MVA)

MVA is a measure of the value Danaher Corp. has created in excess of the resources already committed to the enterprise.

## Long-term Trends

#### Selected Financial Data

since 2005

Main items of Danaher Corp.’s financial statements.

#### Total Asset Turnover

since 2005

Danaher Corp.’s activity ratio calculated as total revenue divided by total assets.

#### Current Ratio

since 2005

Danaher Corp.’s liquidity ratio calculated as current assets divided by current liabilities.

#### Debt to Equity

since 2005

Danaher Corp.’s solvency ratio calculated as total debt divided by total shareholders’ equity.

#### Operating Profit Margin

since 2005

Danaher Corp.’s profitability ratio calculated as operating income divided by revenue.

#### Net Profit Margin

since 2005

Danaher Corp.’s indicator of profitability, calculated as net income divided by revenue.

#### Return on Equity (ROE)

since 2005

Danaher Corp.’s profitability ratio calculated as net income divided by shareholders’ equity.

#### Return on Assets (ROA)

since 2005

Danaher Corp.’s profitability ratio calculated as net income divided by total assets.

#### Price to Earnings (P/E)

since 2005

The P/E ratio tells analyst how much an investor in Danaher Corp.’s common stock pays per dollar of current earnings.

#### Price to Operating Profit (P/OP)

since 2005

Because P/E ratio is calculated using net income, the ratio can be sensitive to nonrecurring earnings and capital structure, analysts may use price to operating profit.

#### Price to Sales (P/S)

since 2005

An rationale for the P/S ratio is that sales, as the top line in an income statement, are generally less subject to distortion or manipulation than other fundamentals such as EPS or book value. Sales are also more stable than earnings and never negative.

#### Price to Book Value (P/BV)

since 2005

The P/BV ratio is interpreted as an indicator of market judgment about the relationship between a company’s required rate of return and its actual rate of return.

## Analysis of Components of Financial Statements

#### Analysis of Income Taxes

- Income Tax Expense (Benefit)
- Effective Income Tax Rate (EITR)
- Components of Deferred Tax Assets and Liabilities
- Adjustments to Financial Statements: Removal of Deferred Taxes
- Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
- Adjusted Net Profit Margin
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)

#### Adjustments to Financial Statements

Differences in accounting methods affect comparisons between companies, and analysts make adjustments to reported financial statements in the interest of comparability.

#### Adjusted Financial Ratios

Differences in accounting methods affect financial ratio comparisons between companies, and analysts make adjustments to reported financials in the interest of comparability.

## Financial Reporting Quality

#### Analysis of Bad Debts

The accounts receivable that are estimated to be uncollectible are called bad debts or doubtful accounts receivable.

#### Aggregate Accruals

Financial reporting quality relates to the accuracy with which Danaher Corp.’s reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.

Aggregate accruals deriving measures of the accrual component of Danaher Corp.’s earnings.