FINANCIAL ANALYSIS

Financial Analysis

[Name of the Author]

[Name of the Institute]

Financial Analysis

Question #1

Introduction

This report discusses the financial performance of two largest UK based companies i.e., Glaxo Smith Kline and Reckitt Benckiser. Their annual financial performances along with the comparison of these two firms based on their financial ratio analysis subject matter of this report.

Glaxo Smith Kline plc (GSK)

Glaxo Smith Kline plc is the UK based multinational pharmaceutical company along with vaccines, biologics and also the consumer health care company. The head quarter of Glaxo Smith Kline plc is in London, United Kingdom. (Logue, 2008) It is among the largest pharmaceutical company of the world. The company was established in the year 2000 with the mergers of two companies, i.e. Glaxo Wellcome plc (that is formed from the combination or the acquisition of Glaxo and Welcome plc) and the Smith Kline Beecham (Warren, 2006) plc (that is formed from the merger of Smith Kline corporation and Beecham plc) that was established by the combination of Beckman companies and Smith Kline French.

Glaxo Smith Kline has the products for the major diseases areas such as cancer, asthma, viral control, mental health, digestive conditions, diabetes and other viral infections.

Reckitt Benckiser

Reckitt Benckiser plc is UK based multinational consumer goods company. The head quarter of the company is in Slough, (Bryan, 2007) United Kingdom. Reckitt Benckiser is one of the biggest producers of the hygiene, health and other home products. The company was established from the acquisition of the two companies i.e. Reckitt and Colman plc, united kingdom based which the other one is Benchkiser NV that is Netherland based.

The products of the company Reckitt Benckiser includes Dettol (one of the world's largest selling antiseptic) the Streptsils (the largest selling of sore throat medicine of the world), Veet ( the world's largest selling hair removal brand) , Airwick ( the world's second largest selling brand of air freshener) along (McGlashan, 2009) with other brands like Cillit Bang, Calgon, Durex, Vanish and Lysol. The company Reckitt Benckiser plc is operating in more than sixty countries of the world and also the products of the company are sold in more than two hundred countries of the world.

Financial Analysis of Reckitt Benckiser

Valuation

RBGPF

Industry Average

S & P 500

Price/Earning

19.8

20.2

16.6

Price/Book

6.2

4.5

2.3

Price/Sales

3.7

2.2

1.5

Price/Cash flows

19.6

14.8

9.7

Dividend Yield %

1.5

3.0

2.3

Price/Fair value

-

-

-

RBGPF

Industry Average

S &P 500

Forward pricing/Earnings

16.8

-

14.3

PEG ratio

3.7

-

-

PEG payback (years)

11.8

-

-

Income Statement

2011

2012

Revenue

9485

9533

Cost of Revenue

3823

3871

Gross Profit

5662

5662

Operating Income

5662

5662

Other income (expenses)

-3286

-3260

Income before taxes

2376

2402

Provision for income tax

1754

1773

Net income from continued operation

1754

1773

Other

-9

-8

Net income

1745

1765

Net income available after tax

1745

1765

Earnings per share

Basic

2.40

2.42

Diluted

2.37

2.40

Weighted average shares

Basic

728

728

Diluted

736

736

EBTIDA

2552

2569

Balance Sheet

2011

2012

Assets

Current Assets

2635

2938

Non Current Assets (Fixed Assets)

10787

11188

Total Assets

13422

14126

Liabilities

Current Liabilities

5734

5700

Non Current Liabilities

2558

2645

Total Liabilities

8292

8345

Stock Holder Equity

5130

5781

Total Liabilities and Stock Holders' Equity

13422

14126

Profitability Ratios

2011

2012

Tax Rate %

26.5

26.18

Net Margin %

18.55

18.51

Asset Turn over

0.69

0.67

Return on Assets %

14.20

12.67

Financial Leverage

2.62

2.58

Return on equity

34.30

31.99

Return on Invested Capital %

34.30

32.13

Interest Coverage

-

-

Liquidity Ratios

2011

2012

Current Ratio

0.52

0.52

Quick Ratio

0.11

0.40

Financial Leverage

2.44

2.58

Debt/ Equity

-

-

Efficiency Ratios

2011

2012

Days Sales Outstanding

47.12

53.7

Days inventory

-

69.82

Payables Period

92.85

274.06

Cash Conversion cycle

-

-150.54

Receivables turn Over

7.75

6.80

Inventory turn Over

-

5.23

Fixed Asset Turn Over

12.93

13.26

Asset Turn Over

0.69

0.67

Financial Analysis of Glaxo Smith Kline

Valuation

GSK

Industry Average

S & P 500

Price/Earning

18.3

-

16.6

Price/Book

15.6

-

2.3

Price/Sales

3.2

-

1.5

Price/Cash flows

19.1

-

9.7

Dividend Yield %

4.4

-

2.3

Price/Fair value

1.1

-

-

GSK

Industry Average

S &P 500

Forward pricing/Earnings

10.4

-

14.3

PEG ratio

1.4

-

-

PEG payback (years)

7.0

-

-

Income Statement

2011

2012

Revenue

27387

26431

Cost of Revenue

7332

7894

Gross Profit

20055

18537

Operating expense

12248

11145

Operating Income

7807

7392

Interest Expense

799

808

Other Income (Expense)

690

108

Income before tax

7698

6692

Provision from income tax

2240

1948

Other Income

-5458

-

Net ...