1. INTEPRETATONS OF FINANCIAL RATIOS
A. GlaxoSmithKline at a glance.
“GlaxoSmithKline (GSK) is a global healthcare company specialized in the discovery, development, manufacturing and marketing pharmaceutical and consumer health-related products. GSK has operations in about 114 countries, with products being sold in over 150 countries”.
A. Evaluation of profitability ratios.
For the evaluation of the profitability ratio over five-year period we will analyse the financial data from the annual reports of two companies: GlaxoSmithKline and Astra Zeneca. First of all, we would like to present the product revenue information of both companies as percentage from total revenues of each company from 2005 to…show more content… In year 2007 quick ratio reached dangerous point – 1,02, company’s ability to pay its short-term obligations was badly influenced by the increase in short-term liabilities In 2008 meaning of the ratio grew up, because of the factors listed above. In year 2009 both ratios fell, since company took more liabilities than in 2008: its short-term borrowings, current tax and short-term provisions increased Average showings on AstraZeneca Quick ratio during the period was 1,13, while GSK – 1,22 which again proves that GSK was more liquid during the analysed period.
The third ratio is the CFO/CL ratio (short-term debt coverage), which shows what part of the company’s short-term liabilities can be payed by its most liquid asset – cash. GSK’s average meaning of the CFO/CL was 0,64 This is a good showing, because it proves that GSK uses its cash effectively, since if the company’s cash ratio equals 1 it means that company has too much cash in reserves During years 2005-2007 the CFO/CL ratio changed very slightly, but in 2008 ratio increased to 0,72, probably because GSK has faced increase in derivative financial instruments, inventories and receivables, which happened due to the strengthening of overseas currencies In