Tesco Main Barriers, Gap Analysis

TABLE OF CONTENTS

INTRODUCTION 2

FINANCIAL RATIOS 4

PROFITABILITY RATIOS 5

LIQUIDITY RATIOS 7

ACTIVITY RATIOS 9

INVESTMENT RATIOS 11

OVERTRADING 13

FINANCIAL STATEMENTS 14

BALANCE SHEET 15

FORMATS OF FINANCIAL STATEMENTS 18

CONCLUSION 22

BIBLIOGRAPHY 23

INTRODUCTION

In this report you will find useful information about GlaxoSmithKline plc (GSK). and AstraZeneca plc (AZN) and overview of these companies. My friend wants to buy shares and ask me for some advice. This report requires an analysis of two companies, in terms of comparing and contrasting. However, I was not able to obtain the latest annual report for AstraZeneca, as they have not yet been produced (complete). In order to make it fair comparison, I have analyzed 2004 figures for GSK and 2005 figures for both companies GSK and AZN. I have successfully obtained details for both companies from FAME (http://fame.bvdep.com) from the FTSE 100 list. After a range of information I going to find the investment potential for these two companies, I going to analyze financial statements using different ratios and I going to describe the differences between financial statements for different types of business. In addition to this, I going to describe the meaning of overtrading and how can you avoid it.

GLAXOSMITHKLINE PLC. OVERVIEW

It is a British based pharmaceutical, biological and healthcare company. World leading research-based pharmaceutical group engaged in anti-infective, central nervous system (CNS), respiratory & gastro-intestinal/metabolic areas, vaccines, oncology products, medicines, oral care products and nutritional healthcare drinks. The company has 107 manufacturing sites in 40 countries with over 101,802 employees. GlaxoSmithKline is a leader in the worldwide consumer healthcare market, with nearly 3.5 billion in sales, over ten Ј70 million brands and present in 130 markets. Ticker symbol GSK.

ASTRAZENECA PLC. OVERVIEW

It is a large Anglo-Swedish and British pharmaceutical company. Group are engaged in healthcare, focusing on the development &sale of medicines and products in areas including cardiovascular, central nervous system, gastrointestinal, infection, oncology, pain control & respiratory & inflammation. The company has 66.600 employees and the ticker symbol is AZN.

GLAXOSMITHKLINE

PLC ASTRAZENECA PLC

31/12/2005

12 months

mil GBP

Cons. 31/12/2004

12 months

mil GBP

Cons. 31/12/2005

12 months

mil GBP

Cons.

* Turnover 21,660

20,359 13,950

* Cost of sales 4,76

4,309 3,120

* Gross Profit 16,896

16,050 10,831

* Profit/loss before tax 6,732

6,119 3,883

* Current Assets 13,177

13,633 8,021

* Stock 721

1,548 286

* Current liabilities 9,511

8,722 3,984

* Short term loans 1,200

1,582 52

* Long term loans 5,188

4,323 647

* Shareholders funds 7,311

5,925 7,920

To find out the investment potential in these companies, we need to know how to interpreter the company accounts. We need useful information such us profit and loss accounts and balance sheet to interpreter accounts in different ways. Therefore ratios calculating should be approached as a five stage processes as below.

* Understand the business, read the accounts in the right order.

* Calculate the main ratios, percentages and performance indicators.

* Business development, forecast, cash flow.

* Explain and draw conclusions as to how the business can improve or has performed.

* Identify strengths and weaknesses of the business.

FINANCIAL RATIOS

Financial ratios are useful tool in interpreting financial statements. Most radios can be calculated from information provided by the financial statements or useful website like yahoo finance or fame; I used these three ways to find the information for my chosen companies. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy. Many people (accountants, stakeholders, investors, managers) use different range of ratios to assist them on making decisions or investigate investment opportunities. Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:

1. Liquidity Ratio

2. Profitability Ratio

3. Leverage Ratio

4. Activity Ratio

1. LIQUIDITY RATIOS provide information about a firm's ability to meet its short-term financial obligations.

2. PROFITABILITY RATIOS offer several different measures of the success of the firm