Glaxo Pakistan

T up to(p) of Contents design As per Jim Collins, *V*ery fewer fo low(a) a capability of dismission from Good to Great. M whatever companies strive to be the best in the market dictate. Most never succeed. Many do so only temporarily and subsequently lose their makeice through mis belowstanding how they got at that stead and what is unavoid fitted to stay there. http//www. roi-ally. com/BPE_vol1. htm in that locationfore in rank to maintain the problem patch and to identify its future needs, iodin requests an accurate outline of the reality of the contrast situation and determine its pecuniary health.This is rather complicated yet unavoid fitted for keeping angiotensin-converting enzymes m wiztary affairs clean and sustains the institutions exploitation. Recognizing the implicationance of the above subject matter, I choose study 8 for my research address i. e. An digest of the pecuniary situation of your prime(prenominal) of organization. The partne rship selected for this single-valued function is **GlaxoSmithKline Pakistan special**, besides referred to as GSK or The troupe. REASON FOR CHOOSING THE TOPIC division selection is based on a number of factors which derived me towards selecting this carro implementlic for my thesis in similarity to otherwise topics condition in research and abridgment thrust guidelines. Fol get-going ar the few reasons for choosing the said topic Relevance to the Current profession eyepatch turn everywhereings(a) in the fiscal Advisory Services Department of Deloitte Pakistan, I got dissimilar opportunities to explore different sectors and industries. This has equipped me with strong interpretational and analytical skills which helped me to buy the farm efficaciously on the said topic. Future AssistanceThe pharmaceutic perseverance provides a lot of financial analytic thinking opportunities beca engross of the complexity of its opeproportionn. This complicated structure enabled me to amend understand and practically apply theoretical knowledge and be bankrupt equipped to undertake financial analysis in my future make doer. magnificence in ACCA Financial analysis is one of the to the spicyest degree primary(prenominal) topics tried and true in ACCA examinations. I personally feel that it is an concerning topic which has a practical application. More everywhere, it enabled me to utilize my IT skills and the knowledge that I offed from my studies.COMPANY AND SECTOR intentness Pakistan has a very vibrant and forward looking Pharma Industry. It has roughly 500 pharmaceutic manufacturing units including those operated by 25 multinationals present in the country. It has shown industrial growth oer the last one decade and now meets approximately 70% of the countrys demand of Finished Medicine. The constancy has invested substantially to upgrade itself in the last few classs and today majority of the industry is follo go Good Manufacturing Practic es (GMP), in accordance with the interior(prenominal) as penny-pinching as planetary Guidance.The industry has the capacity to manufacture a variety of ware ranging from simple pills to sophisticated Biotech, Oncology and Value Added Generic compounds. http//www. ppma. org. pk/ The Company History thither are quaternion major companies in the history of GSK Burroughs Wellcome & Company, Glaxo Laboratories, Beecham and SmithKline and French. GlaxoSmithKline Pakistan Limited was created on January first 2002 through the merger of the aforementioned companies operating separately in Pakistan. Today GSK is standing as one of the givingst pharmaceutical guild of the piece. intersectionion line As a ahead(p) external pharmaceutical community, GSK is dedicated towards worldwide health care and believes it to be ethically important and a disc everywhere to its line of credit success. GSK Pakistans primary activities are manufacturing, import, export and marketing of research- based pharmaceutical and consumer healthcare harvest-times. It operates mainly in two industry segments Pharmaceuticals (prescription do drugss and vaccines) and consumer healthcare ( everyplace-the-counter- medicines, oral care and nutritional care). Market allocateGSK Pakistan limited hopes a major market piece of land in monetary value of ingatherings, asset base, imposeation and innovation. It produces 5 strike outs among the 10 top brands of the pharmaceutical products in the market. It is the 1st federation in Pakistans pharmaceutical industry which r distri thativelyed the revenue of Rs 10 Billion and modernly holds 18. 33% of the tote up volume of the pharmaceutical product coped in Pakistan. Products GSK has a large products portfolio ranging from tablets, toothpaste, inhalers to complex capsules, in over 28,000 different pack sizes and presentations.Principally GSK produces antibiotics, respiratory, dermatological, gastro-intestinal, metabolic, analgesics, f undamental nervous organization (CNS) products and vaccines. AIMS AND OBJECTIVES Objectives and milestones are of crucial importance for any use and are the core of its success, or failure. Setting an objective before initiating the bear provides the need directions and assists in anticipating its result. This tarradiddle aims to mensurate and assess the financial & melodic phrase smudge of GlaxoSmithKline Pakistan Limited for financial year ended declination 30, 2008.This go forth be achieved by the following one-third key tools Vertical digest It deals with the well-nigh sophisticated technique for analyzing the financial statements which is symmetry analysis, withal cognize as trend analysis. This analysis will be conducted to compare GSKs menstruation year writ of execution with its previous layovers under four broad categories i. e. favourableness, get close to Term Solvency, Liquidity and aptitude, pine Term Solvency and stability & Market proportions. a t bottom distributively category different ratios would be channelised depending upon their signifi sackce and appropriateness. crosswise digestFor a often meaningful and judicious picture of the entitys cast it is compared with its enemy within the industry. done this horizontal or challenger analysis, GSKs received year cognitive operation is judge against its major rivalry Sanofi Aventis. This analysis is conducted by the use of financial ratios in the identical four broad categories. Business analytic thinking Business analysis is a well-established mean of thinking critically about an entity, its resources and its environment. This analysis aims to evaluate GSKs proceeding non only from the financial perspective entirely its argumentation as a whole.This will be achieved by the use of technique namely SWOT (Strength, Weaknesses, and Opportunities & Threat) analysis and by conducting a general analysis of stemma soaringlighting its major consummateance ar ea. Future Prospects This report will as well as highlight the companys future objective and strategies and assess its conjunction with GSKs lot and purpose of existence. INFORMATION GATHERING Information is a source of learning. But unless it is organized, processed, and getable to the right people in a format for decision making, it is a burden, non a benefit. William postvassAny course of action that generates a successive message provoke be considered as a source of discipline. Information displace be gathered from virtually anywhere however imagel tuition is that, which when used, adds value. retentivity this in mind, I exploited the most appropriate and au sotic information sources. The major sources used to gather the information are Annual root words The most reliable source of information is the companys annual report. These non only contain financial statements of an entity provided too other information of topical and future scenarios which helps in ev aluating its implementation.Annual Reports of GSK for December 2008 and 2007 and its competitor Sanofi Aventis for the December 2008 were obtained from their websites. Meetings Several informal flavor-offs were conducted with the counsel of GSK regarding its business and financial stance. I in addition managed to slang meeting with senior associates at Deloitte who had an make out of conducting audit of Abbott Laboratories (Pakistan) Limited. They provided me guidance to conduct the business analysis and industry knowledge, to facilitate me in achieving my goals effectively. meshingInternet proved to be one of the strongest sources which enhanced the frequency and prime(prenominal) of information gathered during the project. The official website of GlaxoSmithKline Pakistan Limited (http//www. gsk. com. pk) assisted to assemble constructive information for its interrupt understanding which helped in scrutinizing the companys financial performance. Additionally, different q uotes and definitions were gathered from Google Search Engine. Articles The Article published in scholar Accountant by ACCA, How to Approach Performance Appraisal Questions? by Steve Scott from whitethorn 2006 result, helped in the interpretation of the financial position of GlaxoSmithKline Pakistan Limited. ACCA Study textual matters The study texts of ACCA report F7 and P2, P3, CAT Paper T6 published by BPP and FTC, were the helpful resources in group definitions and interpretations of ratios and conducting business analysis. Financial Analysis Financial analysis is an asp viperect of the general business financial position that involves examining historical and competitor data to gain information about the menstruum and future financial health of a company. ttp//www. enotes. com/small-business-encyclopedia/financial-analysis Comparison with the prior periods (Vertical analysis) and with the competitor (horizontal analysis) in the form of ratios assists an organization in taking appropriate measures for improving its financial credibility. Vertical Analysis drift or vertical analysis is an aspect of technical analysis that evaluates the current performance of the company using the past data. It is based on the idea that what has happened in the past proves traders an idea of what will happen in the future. ttp//www. investopedia. com/. This analysis is done under four broad ratio categories discussed below gainfulness Ratios RETURN ON CAPITAL EMPLOYED (ROCE) The primary measure of gainfulness is normally considered to be ROCE. It is the ratio which measures the relationship in the midst of the sizes of the make haoma relevant to size of the business. (Student Accountant whitethorn 2006) ROCE of the company has r separatelyed at a level of 36. 84% in 2008, which is a growth of 4% from 2007 32. 89% that had reduced by 2. 29% compare to 2006 (35. 18%).This append in 2008 was mainly collectable to the rise up in net loot of 17% in resemblanc e to FY 2007. Whereas, in the year 2007, the augment in superannuated liabilities by 40. 65% (in comparability to 2006) caused a decline in its ROCE. cast compose GROSS PROFIT MARGIN (GP %) The gross gain ground valuation account ratio tells us the returns a business makes on its follow of sales. GP% of GSK was 28. 77% in the year 2008 which demonstrated a pigward(prenominal) trend, since the recorded moulding in the year 2007 was 37. 25% and 38. 33% in 2006 respectively. Despite of the rise in the sales revenue by 26% in 2008, GSKs GP% has change magnitude.This was receivable to the drastic amplify in its speak to of sales by 43. 38% over 2007 (which was particularly due to the rise in novel material & commodities prices), whereas there was no concomitant adjoin in its sales prices (because of no increase in drug prices sanctioned by the government since 2001). The same reason was spy in the year 2007 which squeezed its GP% by 1. 08% over 2006, regardless of the i ncrease in its net sales by 5. 6%. ask out tack together sack up POFIT MARGIN (NP %) A change in the net profit margin is a measure of how well a company has controlled its overheads. Student Accountant- May 2006) NP% of GSK has shown a declining trend by an norm of approximately 1% per year during the three years periods. It was 15. 74% in 2007 but decreased to 14. 59% in the year 2008. However, this reduction was not in the same equalizer as of gross profit, due to the increase in other operating income by 100. 15% (which is 65. 46% of the net profit) and tighter control of company on its expenses during the year. In the year 2007 the NP% decreased by 0. 76% from 16. 50 in 2006, nonetheless indicating no major variation. render install ASSET TURNOVERThe asset utilization ratio (sales/net assets) shows how efficiently the assets are creation used to generate sales. (ACCA P3 BPP Study Text) Asset overthrow of GSK was 1. 26 clock in 2008, which was an increase of 22% from 2 007. This was due to an increase in sales by 26% from 2007 and the raise in rigid assets by 4. 54% (which was because of the nifty investment of 646 million made by the company, the major portion of which was spend on facility improvement, rationalization and upgrading its plant) that resulted in the improvement of its assets turnover rate. However, in the year 2007 it declined by 3% from 1. 7 clock in 2006 to 1. 04 times, which was due to the increase in total assets by 7. 63%. puff out design RETURN ON EQUITY (ROE) ROE is the bar of net income returned as a percentage of contributionholders legality. It measures an entitys profitableness by revealing how much profit a company generates with the money shareholders vex invested. http//www. investopedia. com/ ROE of GSK was 23. 4% in the year 2008 that was 2. 82% higher than 2007, which was because of the advance of 17. 04% in its net profits figure. In the financial year 2007, it some dropped by 1. 32% from 22. 9% in 2006 to 20. 58%. The rejoinderd usual filiation (Bonus Shares) in FY 2007 resulted in its equity enlargement by 7. 7% over 2006, so decelerating its ROE. unpack found Short Term Solvency, Liquidity and Efficiency CURRENT RATIO Current ratio measures a companys ability to gestate its short-term obligations. www. investopedia. com The current ratio of GSK was 4. 221 in 2006 farther declining to 4. 271 and 4. 111 in 2007 and 2008 respectively. Although there shake been a raise in current assets by 5. 98% but current liabilities are increase in a greater likeness i. e. y 10% during 2008, thus decelerating GSKs current ratio by 4% from 2007. Whereas, the decrease of 15% from 2006 to 2007 in current ratio was due to 3. 3% rise in the companys current liabilities. Although there have been no drastic changes in current assets figure over the three year period, however, it comprises almost 34% of property and bank balance, mansion towards ineffective funds management. pot set up QUIC K RATIO The riotous ratio measures the companys ability to meet its short-term obligations with its most liquid assets. It shows part runniness position than current ratio. ww. investopedia. com The quick ratio of GSK has decreased from 3. 13 in FY 2006 to 2. 98 in FY 2007 to 2. 31 in FY 2008. In the year 2008 GSKs quick ratio has declined in a greater proportion than its current ratio, indicating cash be stuck in pullulate in trade which can be seen by an increase of 53% in stock in trade figure over 2007. This implies the company has made high investment in less liquid assets which resulted in the increase of its cash operating cycle. Therefore there is a need to restrain any that increase in its blood level.In the year 2007, schedule only increased by 7%, indicating no substantial change. attractor range ACCOUNTS RECEIVABLE COLLECTION PERIOD (In Days) It is a measure of the average number of geezerhood that a company takes to collect revenue from its customers after a s ale has been made. www. investopedia. com Account receivable accrual period of GSK had radically increased from 4 age in the year 2007 to 27 eld in 2008, which was caused by 770% increase in its accounts receivables (mainly because of high receivable on government tenders) over 2007.Although, this resulted in the augmented sales turnover but it also raised doubtful debt provision from 2. 9 million in 2007 to 4. 6 million in 2008. However, no significant rise was observed in receivable collection period days of 3. 06 days in FY06 from FY07. comeframe ACCOUNTS PAYABLE PAYMENT PERIOD (In Days) It is used to calculate the average number of days that a business takes to pay off its creditors. www. investopedia. com Account payable days of GSK have decreased by 22 days from 93 days in FY 2007 to 71 days in FY 2008. This sudden decline was due to the increase of 43. 8% in make up of goods sold, which is fairly less in comparison to the 9. 94% rise in trade and other payables. However, in FY 2007 the 7% increase in COGS was in proportion to the 6. 25% raise in trade and other payables, resulting in no considerable change in the year 2007 in comparison to 94 days of its preceding year 2006. drawframe Long Term Solvency and stability Ratios GEARING (Long Term Debt / Equity) Gearing is a general term describing a financial ratio which compares some form of owners equity (or capital) to borrowed funds.It is a measure of financial leverage, demonstrating the degree to which a firms activities are funded by owners funds versus creditors funds. Financial gearing ratio of GSK is not significantly important as it has remained below 1% in the 3 year period from 2006 to 2008. Gearing ratio for FY 2008 and FY 2007 is 0. 25% and 0. 29%, which are relatively better in comparison to 0. 88% for the financial year 2006. This indicates that the company is exceedingly parasitic on its internal cash flow generation system and holds a stable financial position.Therefore, it current ly and subsequently would have no problem to borrow funds but at present, it does not count to rely on the strategy of generating finance through debt. drawframe INTEREST COVER It is a ratio that indicates how many times a company can cover its interest charges on a pretax basis. impuissance to meet these obligations could force a company into bankruptcy. www. investopedia. com Interest cover of GSK had declined by 191 times cosmos at 40. 05 times in FY 2008 in comparison to 231. 18 times in FY 2007 which was an increase of 93. 92 times in comparison to 137. 5 times in FY 2006. One of the major reasons for this drastic decline in the interest cover in 2008 is because of the rise in financial charges of GSK, which rose because of the strange substitute losses occurred during the year by the company. This depicts an inefficient FOREX risk management for importing of raw material and exports of its products. epoch in the year 2007 transform losses are apparently low compared to th e other two years. drawframe Market Ratio EARNING PER parcel out (EPS) EPS is the portion of a companys profit allocated to each outstanding share of common stock.Earnings per share serve as an indicator of a companys profitability. www. investopedia. com EPS of GSK had increased from 9. 79 per share in 2007 to 11. 46 per share in FY 2008, but it was lower as compared to 12. 19 per share of 2006. The increase in the current year (FY 2008) is due to vigorous 17. 04% increase in net profit in comparison to the profit of FY 2007 however no further shares issue was made during the year. Whereas, the decline in FY 2007 was due to the issue of common shares (bonus shares) which expand the companys common stock by 25% but net profit remained almost same as of FY 2006. drawframe PRICE EARNING RATIO (P/E) A valuation ratio of a companys current share price compared to its per-share earnings. It is calculated as Market Value/ share divided by Earning per share. www. investopedia. com P/E rat io of GSK has decreased by 13. 03 to 6. 63 in the FY 2008 compare to the FY 2007, but in 2007 it increased by 19. 66 compared to the 12. 81 of FY 2006. The decrease observed in the year 2008 was because of the undervalued share price and improvement in the EPS during the year. The market price of the share in Dec 2008 was Rs. 75. 9 (Dec07 Rs. 192. 4) and the earning per share was Rs. 1. 46 (Dec07 Rs. 9. 79). The low P/E ratio will result in the high expectations of investors for the strength rise in share prices. The stock prices were generally low due to economic recession in the country and fragile moves of the investors at the stock exchange. The increase in P/E ratio during 2007 was due to decrease in EPS by 20% over 2006. drawframe DIVIDEND PAYOUT RATIO (DPO) Dividend payout ratio is the percentage of earnings paid to shareholders as dividends. www. investopedia. com Dividend payout ratio of the company is portrayal a growing trend. Its DPO in the FY 2008 reached to 82. % fr om 76. 6% in FY 2007, i. e. approximately an increase of 6%. This was due to a raise in net profit by 17%, consequently meeting its investors expectation. Whilst the payout ratio of GSK indicates that it was able cover 65. 6% of the total profit in FY 2006. However GSK contain 23. 4% and 32. 4% of its net profits in the year 2007 and 2006 respectively, since intemperate capital expenditure was incurred within these two years, which was financed by its retained earnings. drawframe Horizontal Analysis Knowing your customer is critical, but clear-sighted your disputation can be even more(prenominal) valuable.Better knowledge of rivals proffers a legitimate source of competitive advantage, horizontal analysis commonly known as competitor analysis is used for that purpose. This analysis tends to evaluate the entitys standing in comparison to the other companies within the industry. It is not vital that the companies within the same industry are direct competitors (which can be seen in the case of GSK & Sanofi Aventis hereinafter referred to as SA) even then they would be expected to broadly demonstrate similar performance, in equipment casualty of growth. (ACCAP3).The Horizontal analysis of GSK is done within the same categories of trend analysis. positiveness Ratios Profitability ratios of GSK are better than that of SA. The huge dispute in the profit margin of these two corporations is due to the remnant in their size. Gross profit margin of the GSK is 28. 77%, which is 4. 48% better than that of SA. GSKs vast product range allows it to purchase and produce in bulk, hence reducing its general speak to. On the other move over, SA manufactures low volumes of products which increase its ordering cost and consequently raise its cost of production. Net profit margin of GSK is 14. 9% composition that of SA is 0. 88% in the FY 2008. This difference of 13. 71% indicates that excessive non production cost of SA is squeezing its net profit. As a consequence l ow ROCE of SA of 15. 36% is witnessed in comparison to GSKs 36. 84%. SAs asset turnover of 1. 46 times indicates that it has utilized its assets 0. 2 times more efficiently than GSK to generate sales revenue. Short Term Solvency, Liquidity and Efficiency The current ratio of GSK for FY 2008 is 4. 11 and of SA is 0. 98. Since SAs current ratio is less than 1, it is can lead to the difficulty in fulfilling its short term obligations.SAs liquidity problems can be witnessed from its short term borrowings diligence 48% of the total Current Liabilities. Conversely, Current ratio of GSK is high showing signs of over capitalization. Additionally, cash and bank balances of GSK are 34 % of its total current assets which indicates weak conking capital management. Quick Ratio of SA and GSK is 0. 2 and 2. 25 respectively. This enormous difference from the current ratios of these companies highlights the possibility of investment in assets which are less liquid.The inventory (stock in trade) of the SA is almost 62% of its total current assets while GSK holds near 44% of its current assets. SA has kept a stringent control over its working capital while GSKs policy seems much more relaxed with its creditors and Debtors. These relaxed price could be one of the reasons which helped GSK in increasing its Sales revenue by 26% in FY 2008 from FY 2007. SA, in contrast, has less receivable collection days and increased payable payment days. Hence SA is better at controlling its cash conversion. Long Term Solvency and stability RatiosBoth the companies hold stable positions in the linguistic context of long term solvency. Gearing ratios are not significant as these are less than 1% in both the companies. Interest cover of 40. 05 times shows a sound financial position. Finance cost occurred by GSK mainly consist of the foreign exchange losses borne by the company in importing the raw material. While SA has interest cover of 0. 51 times due to the high finance cost on short term bo rrowing. Market Ratios The huge difference in EPS of GSK and SA is due to their different profitability position.Moreover GSK has a high payout ratio of approximately 83% as compared to 35. 28% of SA. NAV of SA is 2. 5 times higher than GSK particularly due to the high number of equity shares (common stock) issued, which is also reflected in its share price. SA currently has a share price of Rs. 211 and GSKs shares are of Rs. 75. 94/share respectively. SAs P/E ratio of 53. 18 indicates low earnings and high market price of its shares. This is a source of concern indicating that its shares are overvalued. Conversely, GSKs P/E ratio of 6. 63, highlights that its shares are currently undervalued. Business AnalysisThe business performance analysis of GSK will be carried out using SWOT analysis and by general discussion of its business practices. SWOT SWOT analysis is basically about discovering what a company does well, how it could improve, whether it is making the most out of the ava ilable opportunities and whether there are any changes in the market that call for synonymic changes in the business. http//www. bnet. com/2410-13240_23-66478. html Strengths The largest pharmaceutical company in Pakistan. The first company in Pakistans pharmaceutical industry that crossed Rs 10 trillion sales mark.Produces 269 varieties of products, out of which Augmentin, Amoxil, Panadol, Ventolin and Ampiclox are among the top 10 pharmaceutical Rx products of Pakistan. The sales revenue of Augmentin and Amoxil reached to PKR2bn and PKR1bn in 2008. Betnovate is its leading brand by volume. Segment leadership in antibiotics, respiratory products, anti-malaria, gastrointestinal (GI), derma and hepatitis products, vaccines and anti helmentic medicaments. Stood at 1st position in poster competition of worldwide Clinical Operations, fellowship of Practice Meetings.Awarded with corporate philanthropic stage certificate in 2008 by Pakistan Centre for Philanthropy. Contributes to kin dly welfare by running various charitable programs with leading NGOs in Pakistan such as Pakistan National Forum, National Children mankind ontogenesis on womens health, concern for Children trust and the trust for health and medical sciences. Awarded as Best place to work-2008 by a leading HR consultancy in association with Pakistan Society for Human Resource care. Committed to innovation by growing medicines through its spheric R effort.Weaknesses Due to high cost of importing raw material for medicines, GSK faces strong competition from low-cost generic equivalents. Ineffective foreign exchange currency contracts resulted in the increase of exchange losses (financial charges) for the current year. Strict labor laws and a corporate income tax rate, makes it difficult for GSK to operate. Weak cash management. Opportunities Potential for growth in the domestic market. Sector modernization initiatives will create expansion opportunities. Cut of import duties were made by the gov ernment on Pharmaceutical products.This will increase the import of products and motivate foreign involvement in respect of the investment, raw material purchase and technology transfer. Prospective increase in exports of medicines is realistic as currently, Pakistan is ranked among the top eight leading exporters of herbal medicine. Threats profound counterfeit drug industry. Domestic patent law is below international standards. Illegal copying, counterfeiting and law enforcement is continuing to present significant problems for the international pharmaceutical companies operating in Pakistan.Rising numbers of generics is a major obstruction to multinational investment. Increasing inflationary trends without consequent increases in the prices of drugs. Exposed to foreign exchange currency risk as the company is highly dependent on import of raw materials. Slow registration process for approving brisk formulae for medicine thus hampering its access. More about GSK The Vision Th e prospect to make a difference to the lives of billions of people GSK states that they are aware of the work they do to improve the lumber of peoples lives. It takes pride in this and is committed to produce products that benefit patients.It is committed towards improving and implementing the healthcare programs in Pakistan, particularly the area of preventive healthcare and vaccines remains essential and explicit. GSK is the worlds leading developer and manufacturer of vaccines. In order to evaluate the connective of companys activities with its vision, I have conducted the business analysis under the following heads Market Eminence GSK has always remained a strong wing of the pharmaceutical industry of Pakistan. It has managed to maintain a concordant growth in demand of different vaccines, antibiotics, dermatology, gastro intestinal & cardio vascular portfolios.GSK has a wide statistical distribution network, it sell its products to wholesale drug distributors, hospitals, go vernment entities and other institutions, hence covering almost the whole pharmaceutical market. It produces 7 out of 20 top brands in the pharmaceutical industry of the country. It was as awarded The most preferred pharmaceutical company of the year. It is the market leader of pharmaceutical industry of Pakistan. Quality Management Quality in the Pharmaceutical industry is of significant importance. Due to the responsive nature of industry, strict quality parameters are set by the regulatory bodies for pharmaceutical companies.GSK is one of the few companies which not only follow the quality standard set locally but also practice international quality standards. It was reward with the prestigious Corporate truth Award by Management Association of Pakistan (MAP). This was presented after independent evaluation of quality of management practices followed by GSK including corporate governance practices, marketing planning, production, R, corporate social state and remarkable financ ial performance. GSK has always set high quality standards in the industry.It has late introduced quality management system and is conducting workshops for its successful implementation. It has also installed one of the fastest tube filling and cartooning machines for its production competency and is continually go on towards improvement in products quality and productivity. query & Developments GlaxoSmithKline, Pakistan (GSKP) Limited is the largest research-based pharmaceutical company in the country and the second largest in the world. It has recently conducted 19 Phase-II and III studies in therapeutic areas of Oncology, Neurosciences, Psychiatry, Metabolic and Hematology.It got 1st rank in poster competition in International Clinical Operations, Community of Practice Meeting held in Bangkok. Its R departments 10 team members were presented with Gold Awards and Certificate of Recognition by CMD. It spends globally almost US $ 14 million on research and development each da y. The Company has consistently launched new products. Sensodyne Total Care and Sensodyne Gentle gargle launched with unique formulation are its recent addition. Overall, it has supported the Pharma industry of by introducing low cost and quality pharmaceutical products. Employees DevelopmentGSK is well known for universe one of the most preferred employers. It has been awarded as Best place to work in 2008 by a leading HR consultancy in association with Pakistan Society for Human Resource Management. International Day of Disability was celebrated at GSK, showing its strong believes in equal opportunity conflict. Its HR team recently launched a new initiative titled Mentoring, which provides guidance and assistance for developing talent. It also conducted a learning fair in 4 major cities of Pakistan, which offers a different range of courses for employees development and learning exposure.In order to promote and transcend a chance to new talent, its HR team visited 14 Univers ities during its recruitment process. Corporate Social Responsibility (CSR) GSK believes that corporate social office is an integral and embedded part of its business. It is sincerely involved in the community work and in various charitable projects in Pakistan and around the world. It works under the context of various health, women and child development, education, and relief programmers at grass rootage level.In 2008 GSK has been rewarded with a corporate philanthropy award in identification of its support for the social development causes in Pakistan. It is the major corporate sponsor for numerous NGOs and also a member of the National Commission for Human Development (NCHD). As a movement to its corporate social responsibility GSK Pakistan has introduced 1st of its kind, value health card. The card will be issued only on the prescription of doctors, for those who cannot afford pharmaceutical products at their standard retail prices. Environment, Health and Safety (EHS)En vironment, health and safety are major concerns for GSK. It continually works towards improving peoples health and safety and for developing environment friendly products. It has received Environment Excellence Award (AEEA 2008) and EHS Excellence Awards in recognition to its good environmental practices. It has installed low-cost engineering resolving power (glove box), which reduced OEL level by 40%. Business Continuity object desktop exercise was also conducted at all of its sites. CONCLUSION GSK leads the industry in terms of value, volume and market shares.It has managed to improve the quality of human life along with showing consistency and stability in its boilers suit business growth. This reports objective, to assess the financial and business position of GSK, was achieved in four key areas. This report aims to analyze the financial and business position of GSK over the three year period from 2006 to 2008. In the context of aforementioned objectives this report concludes Business GSKs overall business performance is in line with its mission and is contributing towards its strategic objective.Due to its straw man in the country since 1955, it has managed to build strong business foundation and is able to maintain consistent growth in the market. It has excelled in the field of Research and Development by introducing new products covering various generics, ensuring employees satisfaction by providing better environment to work, expanding its operation through empowerment of diverse product portfolio, contributing towards corporate social responsibility by capturing tasks to work for the social health and safety, education and environment friendliness and most importantly being profitable, depicts its strong businesses practices.Financial Trend GSK Pakistan has managed to give better financial results in the current year 2008 as compared to the FY 2007, which identifies its financial stability and further growth prospects. Even though the returns (RO CE & ROE) in the current year have better but its profit margins (GP% & NP %) have depicted a declining trend, which was a result of raise in its revenue expenditure (COGS, Admin, S and Financial expenses).However it can be witnessed that the company has remained focused on never-ending improvement in its business processes and sustained its investment in its product & promotion to offset the negative impact on margins through productivity improvement and sales growth. Although the company was not able to perform well in the year 2007 in comparison to its preceding year 2006, but it was able still able to deliver a stable financial performance having no major threats. This decrease in its financial position during the year was mainly due to the increase in inflation and disparagement in rupee that affected its operating margin negatively.Moreover the capital expenditure made during the year caused a decline in its profitability ratios, but its benefit will be obtained in the later years. The company has always provided sound investment returns which can be seen by consistent growth in its payout ratio. In the year 2007, GSK announce bonus issue of 14 when it declared lower dividends, thus retaining its investors authorization and being a reliable company for all of its stakeholders. contenders ComparisonDue to its larger asset base, vast product portfolio, global presence and skilled research & development function GSK has a subjective edge over its competitor Sanofi Aventis. Overall GSKs financial performance is better than its competitor in the FY 2008. Almost all of the ratios calculated under the four broad heads, shows that GSK is giving better returns and incurring less cost. Profitability ratios of the GSK show a better picture than that of Sanofi Aventis, with the exception of Asset efficiency which shows a better utilization of assets by Sanofi to generate revenues.Liquidity position of both the companies is stable apart from the huge investments that were stuck in the stock in trade. Higher EPS and low P/E ratio of GSK shows that there is a potential for rise in its share price of the Company, in comparison to the overvalued shares of SA resulted in high P/E ratio. Future Prospects The company can be seen as being committed to respond to the challenges of the operating environment and continues to seek opportunities to drive growth in its subsisting portfolio. It has a good pipeline of innovative new medicines together with the sustained availability of existing products.However, the pharmaceutical industry, in which GSK exists, has ample of barriers such as high inflationary environment without general price relief, which makes it difficult to manage its business operations. The company has a great potential for growth, but its sustained success depends on the industrys regulatory environment, that should be able to balance the interest of the company with the need of affordable healthcare. APPENDIcES APPENDIX 1 BALANCE S HEETS (GSK) drawframe APPENDIX 2 PROFIT & LOSS STATEMENTS (GSK) drawframe APPENDIX 3 BALANCE SHEETS (SA) drawframe APPENDIX 4 PROFIT & LOSS STATEMENTS (SA) drawframe APPENDIX 4 RATIOS FORMULAE drawframe APPENDIX 5 RATIOS CALCULATIONS drawframe Key dexterity Statement Skill and Learning Statement is the testimonial which includes the compilation of key factors learned during the course this project. This part of report includes following What did you learn from the meetings with your project mentor, including the presentation that you gave to your project mentor? How well do you think that you have break uped your research interview(s)?How have you demonstrated your interpersonal and converse skills during the project work? How has undertaking the RAP helped you in your accountancy studies and/or current employment quality? Choosing a Mentor In accordance with the guidelines, I was required to hold three meetings with my mentor. Working as a trainee in one of the big four audit firms, made the task of locating a mentor quite easy. Mr. Qayam Karim Maknojia (ACA from Institute of Chartered Accountant of Pakistan), Manager in Financial Advisory Services at Deloitte Touche Tomastu, agreed to occupy the role of my mentor.I choose Mr. Qayam as my mentor because of his vast knowledge and experience in the field of advisory and audit. Meetings Planning all the meetings before hand ensured their smooth running, and enable maximum to be achieved in the shortest time. Meeting 1 Due to time constraint and workload, first meeting took place at 7 pm, Wednesday 16th September, 2009 at our clients office. In order to get most out of the 1st meeting, I had performed all the screen background work and shortlisted two topics, topic 8 and Topic 20 for the purpose of this report.I also selected the potential organizations that I was willing to use for each respective topic, but before making the final decision I decided to consult Mr. Qayam. After discussing number of issues like learning potential and merits of each topic I decided to underpin my research report on Topic 8, business and financial analysis of an organization over a three year period. We also discussed the potential sources of information which I could use for the purpose of this report. Due to workload, Mr.Qayam told me that we will hold the next meeting after finalizing the client and asked me to mail him the agenda and progress of the report one week before the meeting. Meeting 2 Second meeting took place at the 630 pm, after office hours, at Deloitte Karachi force on Thursday 29th October, 2009. As requested by Mr. Qayam, I e- mail-clad him the agenda, my un get it ond report and excel generated worksheet one week before the meeting. By then my report consisted of interpretation ratios of the Company and business evaluation aspects with initial data in bullet points that I was going to use.Mr. Qayam assessed the work that I had performed and pointed out impuissancees and lack of rea soning in my interpretation. He also suggested that I should incorporate a competitor analysis so that a complete financial overview is covered in the report. Furthermore, he also pointed the fact that, it was not feasible to use business model as the data required for them are hard to come by. Instead, he recommended me to take some peculiar(prenominal) aspect of the companys operations and evaluate their alignment with its vision and strategic objectives.We concluded the meeting and my mentor told me to take as much time as I want, because the deadline for the submission of the report is too far. He asked me to mail him final draft report once I have completed it. Meeting 3 The last meeting was held in the assembly room of Deloitte Pakistans Karachi office on Wednesday, 25th November, 2009. I had mailed the final draft report to my mentor around 15 days before the meeting. After receiving his acknowledgment, I prepared presentation on Microsoft PowerPoint 2007 slides to give it a more professional look. I consulted my seniors, as how to make and pitch shot good quality presentation.Keeping the guidance provided by my seniors in mind, I prepared and rehearsed my presentation several times. I was a bit shaky at the start of the meeting, but my confidence level grew as I proceeded. After the presentation question set session took place, which was most provoke as my colleagues and mentor tried to challenge my research by inquire numerous questions. I was glad that I had prepared myself for this, although I was not able to answer 100% of the questions asked, my mentor and colleagues were satisfied with the work I had performed and effort I gave in preparing this report.Assessment of the foundation The presentation took place in drive of my mentor and my office colleagues. It took me nearly two days to structure and prepare the presentation. After that, I rehearsed the number of times wholly to build confidence. The day before the meeting, I gave this pr esentation in front of my friends, who are MBA professionals so that they can point out any weakness in my conversation. At the start of the meeting I distributed, handouts consisting of ratios, competitor analysis and summary of the business performance of the Company.The meeting progressed smoothly throughout the presentation. As I have already informed the listeners that a question answer session will take place after the presentation is over, no interruption occurred in between. In the introduction phase, it was quite clear that most of my colleagues didnt possess any prior knowledge of GSK Pakistan Limited, so they took a keen interest in the topic. During the Q & A session numbers of questions were asked by my colleagues challenging my research. Most of the questions related to the financial aspects of the Company, like why I chose that particular competitor.Most exciting questions were asked by my mentor, which focused on the business performance and which widen my horizon o f analyzing the business. Overall the presentation was effective. I was able to deliver the presentation in the allocated time, although question answer session went long-term than I had hoped. After the presentation my overall efforts were appreciated by my colleagues and mentor. Presentation Outline drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe unbelieving Questioning is a vital ingredient of effective conversation based on any medium. It enhances understanding, searches for clarification and opinions. There are two basic types of questions Open questions such as what? Who? Where? The responses they require are in broad terms. Open questions can further be classified in to probing questions and leading questions. Closed question defines a parameter which limits the response of the questioned individual to choices like Yes or No.During the three meeting Questioning formed a significant part of the communication. Through this me and my mentor developed ideas and structured my thoughts which helped me in completing my report. During the question answer session both open up and close ended question were asked by the audience, which tested my knowledge rigorously and helped me identifying weakness in the communication process. However, Questioning was two way process. Numerous open ended questions were asked by me, in order to gain better understanding of the work I had to perform and whether I was on the right track or not.earshot As communication are a two way process between sender and a receiver. Listening is the act of decoding the information being received and it forms a fundamental part of a communication process. Listening is as important a characteristic as questioning. Every communication process is open to noise and distortion and the meaning of the message being delivered is altered or lost if they are present. Th e first meeting held was open to frequent physical noises and distractions. One of my weaknesses that came into light during the 1st meeting was that, I found out to be an impatient listener.I interrupted Mr. Qayam at numerous times when I did not agree with his opinions. Learning from the 1st meeting other meetings were arranged and timed to avoid interruption. I started to drive more patient and listened to my mentor with full concentration and noted down questions which I asked after he has concluded. During my 3rd meeting I spy that some of the audience members were not listening effectively as they asked question which have already be answered during the course of my presentation. Self Evaluation drawgOverall communication process consists of a sender, transmitting a message to the receiver through a communication medium. The process of communication is incomplete and/or ineffective until it is confirmed via feedback, that the receiver understood the mean message. The commun ication between me and my mentor could be seen by the above communication model. During the course of my project, the overall interaction with my mentor was quite effective. We were able to decrypt each others message easily and were able to advance our thoughts properly.Perhaps, one of the reasons for effective communication was the informal relation with him, which allowed me to ask questions without being reluctant. I have used number of channels to communicate with my mentor, email being the most effective medium after face to face conversation. The interaction with my colleagues during the presentation was not effective. Reason for which could be that I was not able to generate their interest. Due to this I had to repeat things over and over again. I was also asked questions, answers for which were already given in the presentation further implying that communication flow was hampered.Being an ACCA Affiliate and recruited recently, as a trainee consultant in Deloitte Pakist an, requirement for sound evaluation and interpretational skills are essential. During the course of this project, it had not only strengthened my academic knowledge I acquired before and supply my interpretational and data mining skills, but also helped me into developing presentational skills which I lacked. Significant portion of the analysis of GSK was performed using ratio/trend analysis over a three year period ended 2008.In order for the assessment to be systematic and logical these ratios were broken into 4 broad categories so that proper attention would be given to each section and no major area was overlooked. To give a more meaning evaluation of the Companys financial performance, I also incorporated, as guided by my mentor, a horizontal or competitor analysis of GSK with Sanofi Aventis. Performing business analysis of GSK was a difficult task, as this analysis required qualitative data in addition to the valued data about the Company.After carefully evaluating how to a ssess the business performance of a company I came to the conclusion that it was not feasible to use business evaluation models for the analyses of GSK as significant internal data was required. I discussed different operations for the company, evaluated whether they aligned with its vision and strategic objectives. Furthermore, I also used a corporate appraisal technique called SWOT analysis. In order to make my findings easy to understand for my mentor, I decided to use as minimum figures as I could and instead relied upon using graphs and interpretation data as a percentage.Microsoft Office was extensively used for this and by the end of this research project I was able to navigate around and use advance level options of its applications with ease. According to me, this research and analysis report contains a sound financial and business analysis of GSK Pakistan and fulfills the requirement to Topic of 8 of BSc. guidelines with ease. References Printed Material ACCA Study Text ( 2008/09) Paper F9 Financial Management. Kaplan publication Foulks kill ACCA Study Text (2008/09) Paper F7 (INT) Financial Reporting.Kaplan Publishing Foulks Lynch ACCA Study Text (2008/09) Paper P2 (INT) Corporate Reporting. BPP Learning Media Ltd ACCA Study Text (2008/09) Paper P3 Business Analysis. BPP Learning Media Ltd Annual Report (2006), Glaxo SmithKline. Annual Report (2007), Glaxo SmithKline. Annual Report (2008), Glaxo SmithKline. Electronic and Other Material Types BNET. SWOT Analysis http//www. bnet. com/2410-13240_23-66478. html (Visited 05th November 2009) Financial Analysis http//www. enotes. com/small-business-encyclopedia/financial-analysis (Visited 05th November 2009)Introduction http//www. roi-ally. com/BPE_vol1. htm (Visited 05th November 2009) Industry http//www. ppma. org. pk/ (Visited 05th November 2009) Investopedia. Vertical Analysis http//www. investopedia. com/terms/v/vertical_analysis. asp (Visited 05th November 2009) Investopedia. Return on Equity http/ /www. investopedia. com/terms/r/returnonequity. asp (Visited 05th November 2009) Investopedia. Current Ratio http//www. investopedia. com/terms/c/currentratio. asp (Visited 05th November 2009) Investopedia.Quick Ratio http//www. investopedia. com/terms/q/quickratio. asp (Visited 05th November 2009) Investopedia. Accounts Recievable Collection Period http//www. investopedia. com/terms/a/average_collection_period. asp (Visited 05th November 2009) Investopedia. Accounts Payable Payment Period http//www. investopedia. com/terms/a/accountspayableturnoverratio. asp (Visited 05th November 2009) Investopedia. Interest Cover http//www. investopedia. com/terms/i/interestcoverageratio. asp (Visited 05th November 2009) Investopedia.Earning Per Share http//www. investopedia. com/terms/e/eps. asp (Visited 05th November 2009) Investopedia. Dividend Payout Ratio http//www. investopedia. com/terms/d/dividendpayoutratio. asp (Visited 05th November 2009) William Pollard. Quote (Visited 07th November) http//thinkexist. com/quotation/information_is_a_source_of_learning-but_unless_it/226524. html BIBLIOGRAPHY Electronic and Other Material Types Competitor Websites Novartis Pharma http//www. novartis. com (Visited 05th November 2009) Sanofi-Aventis http//www. anofi-aventis. com. pk (Visited 05th November 2009) Regulators/ Governments Websites Karachi Stock Exchange http//www. kse. com. pk (Visited 15th November 2009) Pakistan Pharmaceutical Manufacturers Association http//www. ppma. org. pk (Visited twelfth November 2009) Newspaper Websites Business Recorders website http//www. brecorder. com (Visited many times) Dawns website http//www. dawn. com (Visited many times) The Financial Daily website http//www. thefinancialdaily. com (Visited many times)