FM Project Report

Financial Management MBAE2014-2016
Acknowledgement
We would like to express our deepest appreciation to all those who provided us the
possibility to complete this report. We give the special gratitude to our course instructor
Professor Shahid Mahmood, whose contribution in stimulating suggestions and
encouragement helped us to coordinate and complete our project successfully.
Institute of Business Administration | 1

Table of Contents
Company Profile & Introduction.............................................................................................. 5

Company Profile & Introduction.............................................................................................. 7
Abbott Pakistan Products & Brands ........................................................................................ 9
GSK Pakistan Products & Brands ........................................................................................... 11
Financial Analysis Common Size: ........................................................................................ 14
Common Size Analysis of Balance Sheet: .......................................................................... 14
Common Size Analysis of Profit & Loss Account: .............................................................. 17
Financial Analysis Index Analysis: ....................................................................................... 20
Index Analysis of Balance Sheet ........................................................................................ 20
Index Analysis of Profit & Loss Account ............................................................................ 23
Financial Ratio Analysis.......................................................................................................... 26
Liquidity Ratios: ................................................................................................................. 26
Current Ratio: ................................................................................................................ 26
Acid-Test (Quick) Ratio: ................................................................................................. 27
Financial Leverage Ratios: ................................................................................................. 29
Debt to Equity Ratio:...................................................................................................... 29
Total Capitalization Ratio: .............................................................................................. 30
Coverage Ratios: ................................................................................................................ 31
Interest Coverage Ratio: ................................................................................................ 31
Activity Ratios: ................................................................................................................... 33
Receivable Turnover Ratio: ............................................................................................ 33
Payable Turnover Ratio: ................................................................................................ 34
Inventory Turnover Ratio: ............................................................................................. 36
Total Assets Turnover Ratio: .......................................................................................... 37
Profitability Ratios: ............................................................................................................ 38
Gross Profit Margin:....................................................................................................... 38
Net Profit Margin: .......................................................................................................... 39

Return on Investment: ................................................................................................... 41

Return on Equity: ........................................................................................................... 42
Market Ratios: ................................................................................................................... 43
Earnings per Share (EPS): ............................................................................................... 43
Dividend per Share (DPS): .............................................................................................. 45
Net Capital: .................................................................................................................... 46
Dividend Yield Ratio: ...................................................................................................... 48
Price Earning (P/E) Ratio: ............................................................................................... 49
Findings & Summary .............................................................................................................. 52
Conclusion.............................................................................................................................. 52


Company Profile & Introduction
Abbott Laboratories (Pakistan) Limited is engaged in the manufacture, import and

marketing of research-based pharmaceutical, nutritional, diagnostic, diabetes care,
molecular devices, hospital and consumer products, and in providing toll manufacturing
services. It operates in three business segments: Pharmaceutical, Nutritional and Others.
The Pharmaceutical segment is engaged in the manufacture, import and marketing of
research based pharmaceutical products and in providing toll manufacturing services. The
Nutritional segment is engaged in the manufacture, import and marketing of pediatric
nutritional products and medical nutritional products. The Companys nutritional products
include Similac, Isomil, Pediasure, Pedialyte, Formance, Ensure, Ensure Plus and Glucerna
RTF. The other segment represents the manufacture, import and marketing of diagnostic
equipment, diabetes care, molecular devices, their testing kits and general health care
products.
Our Mission:
"To improve lives by providing cost-effective health care products and services."
Our Values:
"Abbott's vision is to be the world's premier health care company. Simply put, we want to
be the best - the best employer, the best health care supplier, the best business partner, the
best investment and the best neighbor."


Company Profile & Introduction
GlaxoSmithKline Pakistan Limited was created January 1st, 2001 through the merger of
SmithKline and French of Pakistan Limited, Beecham Pakistan (Private) Limited and Glaxo
Wellcome (Pakistan) Limited- standing today as the largest pharmaceutical company in
Pakistan. As an industry leader we are committed to our mission of providing patients quality
products to help improve their lives.
Our Mission:
GlaxoSmithKline one of the world's leading research-based pharmaceutical and healthcare

companies is committed to improving the quality of human life by enabling people to do
more, feel better and live longer.
Our Values:
GSK values are deeply embedded in every function, across the globe. Strategic development,
operations, and customer engagement are based on our values of
What We Do:
As a leading international pharmaceutical company GSK makes a real difference to global

healthcare and specifically to the developing world. GSK believes this is both an ethical
imperative and key to business success. Companies that respond sensitively and with
commitment by changing their business practices to address such challenges will be the leaders
of the future. GSK Pakistan operates mainly in two industry segments: Pharmaceuticals
(prescription drugs and vaccines) and consumer healthcare (over-the-counter- medicines, oral
care and nutritional care).
GSK Pakistan leads the industry in value, volume and prescription market shares, and is
committed to the mission of providing patients quality products to help improve the quality of
their lives.


Abbott Pakistan Products & Brands


GSK Pakistan Products & Brands


Financial Analysis of
GSK and Abbott

Financial Analysis Common Size:

Common Size Analysis of Balance Sheet:
It is analysis of percentage financial statements where all balance sheet items are divided by
total assets and all income statement items are divided by net sales or revenue. The Common
Size Analysis of Balance Sheets of both Abbott and GSK Pakistan for years 2012 and 2013 is
given below:
Balance Sheet of Abbott

Vertical Analysis / Common Size Analysis
Regular Figures (Rs. In 000) Common Size (%)
2013 2012 2013 2012
Non-Current Assets
Fixed Assets 3225350 5814504 98.6 98
Long term prepayments 8065 6491 0.07 0.07
Long term loans and advances 31896 44281 0.3 0.5
Long term deposits 4103 3737 0.03 0.04
3269414 2742498 29 29.4
Current Assets
Stocks and spares 107238 121844 0.96 1.3
Stock-in-trade 2762690 2426561 24.7 26
Trade debts 546093 566734 4.9 6.1
Loans and advances 172205 123308 1.5 1.3
Trade deposits and prepayments 154613 151781 1.4 1.6
Accrued profit 5922 2973 0.053 0.03
Other receivables 79269 80766 0.71 0.87
Taxation recoverable 173509 323185 1.6 3.5
Cash and bank balances 3897051 2790212 35 29.9
7898590 6587364 70.7 70.6
Total Assets 11168004 9329862 100.0 100.0
Share Capital & Reserves

Share Capital 979003 979003 8.8 10.5
Reserves 7768262 1241311 69.6 13.3
8747265 6707394 78.3 71.9
Non-Current Liabilities
Deferred taxation 203562 189557 1.8 2.03
Current Liabilities
Trade and other payables 2217177 2432911 19.9 26.1
Total Liabilities & Shareholders equity 11168004 9329862 100.0 100.0

Balance Sheet of GSK

2013 2012 2013 2012
Non-Current Assets
Fixed Assets 5973404 5814504 33.3 35.8
Intangible-Goodwill 955742 955742 5.3 5.9
Long term loans to employees 70079 81959 0.4 0.5
7016090 6868966 39.1 42.3
Current Assets
Stock-in-trade 6271405 5080220 35.0 31.3
Trade debts 349950 350362 2.0 2.2
Interest accrued 9753 12205 0.1 0.1
Refunds due from governments 46951 40759 0.3 0.3
Taxation - payments less provision 1231588 660092 6.9 4.1
Investments 224269 198118 1.3 1.2
Cash and bank balances 1872999 2117626 10.4 13.0
10922720 9381557 60.9 57.7
Total Assets 17938810 16250523 100.0 100.0

Share Capital 2895156 2631960 16.1 16.2
Reserves 8454157 8761478 47.1 53.9
11349313 11393438 63.3 70.1
Staff Retirement Benefits 250977 175280 1.4 1.1
862989 706030 4.8 4.3
Current Liabilities
Provisions 165079 200716 0.9 1.2
5726508 4151055 31.9 25.5
Interpretation:
If we look at the common size analysis of GSK Balance Sheet, we come to know that there is a
decline in fixed assets out of total assets from 2012 to 2013. However, there is no increase in

long term deposit of the company from 2012 to 2013. The reason could be no further saving /
deposits from previous to existing year. If we look at the inventory account (stock and spares,
the percentage out of total assets is same and the company managed to keep it at the same
level, making sure that inventory does not pile up.
There is only a slight increase in percentage of investment from 2012 to 2013. However, cash
and bank balances have been seen to be in a declining state. The reserves have also gone down
from 2012 to 2013. Almost, same share capital as 2012 was issued / raised.
There is no major increase in long term liabilities from 2012 to 2013. However, the accounts
payables have increased greatly over the year.
Now, if we look at the common size analysis of Abbott Balance Sheet, we come to know that
there is a big decline in fixed assets out of total assets from 2012 to 2013. Also, there is
decrease in long term deposit of the company from 2012 to 2013. The reason could be further
saving / deposits from previous to existing year. If we look at the inventory account (stock and
spares, the percentage out of total assets has decreased. This shows that the company is well
managing to keep it at the smaller level, making sure that inventory does not pile up.
Moreover, cash and bank balances have been seen to be in a rising state. The reserves have
also gone up from 2012 to 2013. Furthermore, same share capital as 2012 was issued / raised.
There is no major increase in long term liabilities from 2012 to 2013. However, the accounts
payables have decreased greatly over the year.

Common Size Analysis of Profit & Loss Account:
The common size analysis of both Abbott and GSK Profit & Loss Account / Income Statement is
given below:
Profit & Loss Account of Abbott

2013 2012 2013 2012
Net Sales 17217258 15216253 100.0 100.0

Cost of sales 10595612 9513425 62 62.5
Gross Profit 6621646 5702828 39 37.5
Selling & distribution expenses 2471404 2212421 14 14.5

Administrative expenses 366938 344494 2.13 2.3
Other operating expenses 367184 312980 2.13 2.1
Other income 273059 183430 1.6 1.2
Financial charges 2956 2226 0.01 0.015
Profit before taxation 3836223 3014137 22.2 19.8
Taxation 1157374 924042 6.7 6.1
Profit after taxation 2528849 2090095 14.7 13.7
Profit & Loss Account of GSK

2013 2012 2013 2012
Net Sales 25230878 23149964 100.0 100.0

Cost of sales 19007165 17104983 75.3 73.9
Gross Profit 6223713 6044981 24.7 26.1
Selling, marketing & distribution expenses 3635914 3028264 14.4 13.1

Other income 454916 330125 1.8 1.4
Operating Profit 1969089 2369259 7.8 10.2

Taxation 747609 995243 3.0 4.3

Interpretation:
If we look at the common size analysis of GSK Income statement, we come to know that COGS
has increased majorly from 2012 to 2013. This is the reason that gross profit has declined over
the year. When the overall cost increases, the profit decreases.
Due to high expenses of selling, marketing and distribution, we observe that there is a decrease
in operating profit as well whereas all other expenses were almost at the same level as in 2012.
The company should shift its focus towards decreasing selling and marketing expenses in order
to make sure that operating profit increases by a higher amount.
The company has paid interest in the form of financial charges higher than previous year and
that is why we get low profit after interest, as compared to 2012. Summing it all up, the EAT /
profit after tax is less than 2012 which is not a favorable picture in terms of profit maximization
by company.
Now, if we look at the common size analysis of Abbott Income statement, we come to know
that COGS has increased majorly from 2012 to 2013. This is the reason that gross profit has
declined over the year. When the overall cost increases, the profit decreases.
Due to slightly high expenses of selling but higher other income, we observe that there is an
increase in operating profit as well whereas all other expenses were almost at the same level as
in 2012. The company should shift its focus more towards decreasing selling expenses in order
to make sure that operating profit increases more.
The company has paid interest in the form of financial charges which are almost same for both
years and that is why we get high profit after interest, as compared to 2012. Summing it all up,
the EAT / profit after tax is more than 2012 which is highly favorable picture in terms of profit
maximization by company.

Financial Analysis of
GSK and Abbott

Financial Analysis Index Analysis:

Index Analysis of Balance Sheet
It is analysis where all balance sheet or income statements figures for a base year equals 100%
& subsequent financial statement items are expressed as % of their values in base year.
Balance Sheet Index Analysis of Abbott (Base Year = 2012)
Regular Figures (Rs. In 000) Index (%)

2013 2012 2013 2012
Non-Current Assets
Fixed Assets 3225350 5814504 55.5 100.0
Long term prepayments 8065 6491 124.3 100.0
Long term loans and advances 31896 44281 72 100.0
3269414 2742498 119.2 100.0
Current Assets
Stocks and spares 107238 121844 88 100.0
Stock-in-trade 2762690 2426561 113.9 100.0
Trade debts 546093 566734 96.4 100.0
Accrued profit 5922 2973 199 100.0
Other receivables 79269 80766 98 100.0
Taxation recoverable 173509 323185 54 100.0
7898590 6587364 119.9 100.0
Total Assets 11168004 9329862 119.7 100.0

Share Capital 979003 979003 1 100.0
Reserves 7768262 1241311 625.8 100.0
8747265 6707394 130.4 100.0
Current Liabilities
Balance Sheet Index Analysis of GSK (Base Year = 2012)


2013 2012 2013 2012
Non-Current Assets
Fixed Assets 5973404 5814504 102.7 100.0
Intangible-Goodwill 955742 955742 100.0 100.0
Long term loans to employees 70079 81959 85.5 100.0
7016090 6868966 102.1 100.0
Current Assets
Stock-in-trade 6271405 5080220 123.4 100.0
Trade debts 349950 350362 99.9 100.0
Interest accrued 9753 12205 79.9 100.0
Refunds due from governments 46951 40759 115.2 100.0
Taxation - payments less provision 1231588 660092 186.6 100.0
Investments 224269 198118 113.2 100.0
10922720 9381557 116.4 100.0
Total Assets 17938810 16250523 110.4 100.0
Share Capital 2895156 2631960 110.0 100.0
Reserves 8454157 8761478 96.5 100.0
11349313 11393438 99.6 100.0
Staff Retirement Benefits 250977 175280 143.2 100.0
862989 706030 122.2 100.0
Current Liabilities
Provisions 165079 200716 82.2 100.0
5726508 4151055 138.0 100.0
Interpretation
If we look at the Index analysis of GSK Pakistan Balance Sheet, we come to know that there is a
%age decrease in long term loans to employees as compared to base year. However, there is an
overall slight increase in non-current assets. There are also an increased percentage of current
assets by almost 10%. This can be due to an increase in trade deposits and prepayments.

However, there is an increase in cash and bank balance. This cash could have been used by
company in investments over the year.
If we look at share capital and reserves, we see that there is a decrease in that in 2013.
However, if we look at the liabilities side, we get to know that long term liabilities have
increased and current liabilities have also increased. This is due to an increase in accounts
payables over the time. The company might not have been able to pay off the payables timely.
Likewise, there is an overall increase in liabilities as compared to base year.
Now, if we look at the Index analysis of Abbott Pakistan Balance Sheet, we come to know that
there is a %age decrease in long term loans and advances as compared to base year. However,
there is an overall large increase in non-current assets. There are also an increased percentage
of current assets by almost 19.7%. This can be due to an increase in trade deposits and
prepayments. However, there is an increase in cash and bank balance. This cash could have
been used by company in investments over the year.
If we look at share capital and reserves, we see that there is an increase in that in 2013.
However, if we look at the liabilities side, we get to know that current liabilities have decreased.
This is due to a decrease in accounts payables over the time. The company might have been
able to pay off the payables timely. Likewise, there is an overall decrease in non-current
liabilities as compared to base year.

Index Analysis of Profit & Loss Account
The Index analysis of both Abbott and GSK Pakistan Income Statement is given below:
Profit & Loss Account of Abbott

Horizontal Analysis / Index Analysis
2013 2012 2013 2012
Net Sales 17217258 15216253 113.2 100.0

Cost of sales 10595612 9513425 111.4 100.0
Gross Profit 6621646 5702828 116.1 100.0
Selling & distribution expenses 2471404 2212421 111.7 100.0

Other income 273059 183430 148.9 100.0
Taxation 1157374 924042 125.3 100.0
Profit after taxation 2528849 2090095 121 100.0
Profit & Loss Account

Horizontal Analysis / Index Analysis
2013 2012 2013 2012
Net Sales 25230878 23149964 109.0 100.0

Cost of sales 19007165 17104983 111.1 100.0
Gross Profit 6223713 6044981 103.0 100.0
Selling, marketing & distribution expenses 3635914 3028264 120.1 100.0

Other income 454916 330125 137.8 100.0
Operating Profit 1969089 2369259 83.1 100.0
Taxation 747609 995243 75.1 100.0

Interpretation
If we look at the Index Analysis of GSK Income Statement, we get to know that the net sales of
the company have increased with a growth of 9% in 2013. The sales were lower in base year
2012. The underlying growth in pharmaceutical segment was 9.4%. So, GSK Pakistan has been
able to meet up the industry benchmark / average in terms of sales growth. However, there is
also an increase in cost of sales from 2012 to 2013.
The expenses have increased overall, with only decrease in other operating expenses and that
is the reason we have lower operating profit as compared to base year. The company should
start thinking about decreasing the operational costs and expensed to increase the operating
profit.
The financial charges have also increased drastically over the time and that is why we have
lower profit after interest and taxes. Although the sales were higher than base year, but profit
after tax was lower due to high expenses and other financial costs.
Now, if we look at the Index Analysis of Abbott Income Statement, we get to know that the net
sales of the company have increased with a growth of 13.2% in 2013. The sales were lower in
base year 2012. However, there is also an increase in cost of sales from 2012 to 2013.
The expenses have increased overall. So, the company should start thinking about decreasing
the operational costs and expensed to increase the operating profit.
The financial charges have also increased slightly over the time and that is why we have
comparatively higher profit after interest and taxes. This is because the sales were higher than
base year, thus the profit after tax was higher.

Financial Ratio Analysis

of GSK and Abbott

Financial Ratio Analysis
Note: In all graphs, Series 1 represent GSK, whereas, Series 2 represent Abbott.
Liquidity Ratios:
A liquidity ratio provides information on a companys ability to meet its short term,
immediate obligations.
Current Ratio:
Current Ratio is the ratio of current assets to current liabilities and indicates a companys ability
to satisfy its current liabilities with its current assets.
Current Assets
Current Ratio =
Current Liabilities
(Amount in Rs. 000)
Current Ratio (GSK)

Year Current Assets Current Liabilities Ratio
2013 10922720 5726508 1.9:1
2012 9381557 4151055 2.3:1
(Amount in Rs. 000)
Current Ratio (Abbott)

Year Current Assets Current Liabilities Ratio
2013 7898590 2217177 3.6:1
2012 6587364 2432911 0.2:1

Current Ratio Trend Analysis
4 3.6
3.5
3
2.3
2.5
1.9 Series1
2
1.5 Series2
1
0.5 0.2
0
2012 2013
Interpretation:
We can see that Current Ratio of GSK Pakistan has decreased from 2012 to 2013. But there is
increase in Abbott current ratio value. It means that Abbott is comparatively more able to
satisfy or pay off its current liabilities out of its current assets. As a rule, the current ratio with
2:1 (or) more is considered as satisfactory position of the company. The current liabilities in the
form of trade and other payables increased majorly in 2013 due to which the ratio declined for
both firms. This picture of current ratio for Abbott is thus satisfactory. So, GSK should focus
more on cutting current liabilities.
Acid-Test (Quick) Ratio:

The quick ratio is the ratio of quick assets (generally current assets less inventory) to current
liabilities which indicates a companys ability to satisfy current liabilities with its most liquid
assets.
Current AssetsInventories
Quick Ratio =
Current Liabilities
(Amount in Rs. 000)
Quick Ratio (GSK)

Year Quick Assets Current Liabilities Ratio
2013 4494767 5726508 0.8:1
2012 4160646 4151055 1.0:1

(Amount in Rs. 000)
Quick Ratio (Abbott)

Year Quick Assets Current Liabilities Ratio
2013 4700415 2217177 2.12:1
2012 4184606 2432911 1.72:1
Quick Ratio Trend Analysis
2.5
2.12
2.0 1.72
1.5
Series1
1.0
1.0 0.8 Series2
0.5
0.0
2012 2013
Interpretation:
Quick Ratios of GSK Pakistan have decreased, whereas that of Abbott has increased. So, it
shows an unsatisfactory picture for GSK because its quick ratio for 2013 is even lower than 1
and it means that company does not have many liquid assets and has high percentage of
inventory. The company is not in a good position to pay off current liabilities using its most
liquid assets. If the current liability is Rs.1, the company would not be able to pay it only from
its quick assets. The reason is decreased cash and bank balance and increased inventory from
previous year. The low quick ratio indicates a potential problem in GSKs inventory account
which must be considered by company.

Financial Leverage Ratios:

Financial leverage ratios show the extent to which the company is financed by debt.
Debt to Equity Ratio:

It indicates the relative used of debt and equity as sources of capital to finance the companys
assets.
Long Term Debt

Debt to Equity Ratio =
Shareholder s Equity
(Amount in Rs. 000)
Debt to Equity Ratio (GSK)

Year Long term Debt Shareholder's Equity Ratio
2013 862989 8747265 0.1:1
2012 706030 6707394 0.1:1
(Amount in Rs. 000)
Debt to Equity Ratio (Abbott)

Year Long term Debt Shareholder's Equity Ratio
2013 31896 11349313 0.0028:1
2012 44281 11393438 0.003:1
Devt to Equity Ratio Trend Analysis
0.12
0.1 0.1
0.1
0.08
Series1
0.06
Series2
0.04
0.02
0.003 0.0028
0
2012 2013

Interpretation:
The debt to equity ratios for both Abbott and GSK Pakistan are almost constant over the period
of 2 years and shows the percentage of debt in the overall capital. As shown in the above
figure, the percentage of debts which finances both companies is not very large and somehow
it shows a favorable picture in the sense that both firms are financed mostly by shareholders
capital and not by debt financing.
Total Capitalization Ratio:
It shows the relative importance of long term debt to long term financing of the firm.
Long Term Debt

Total Capitalization =
Total Capitalization
(Amount in Rs. 000)
Total Capitalization Ratio (GSK)

Year Long term Debt Total Capitalization Ratio
2013 862989 12212302 0.1:1
2012 706030 12099468 0.1:1
(Amount in Rs. 000)
Total Capitalization Ratio (Abbott)

Year Long term Debt Total Capitalization Ratio
2013 31896 11381209 0.003:1
2012 44281 11437719 0.004:1

Total Capitalization Trend Analysis
0.12
0.1 0.1
0.1
0.08
Series1
0.06
Series2
0.04
0.02
0.004 0.003
0
2012 2013
Interpretation:
Total capitalization ratio of GSK Pakistan is constant over the period of two years and stands at
0.1:1, while that of Abbott has decreased slightly from 2012 to 2013. It means that out of total
capital structure which consists of long term debt and shareholders equity, GSK has long term
debt financing of only around 10%, whereas that of Abbott is around 0.3% only. It means that
GSK total capital structure consists majorly of shareholders equity, whereas Abbott total
capital structure consists slightly of shareholders equity.
Coverage Ratios:
Coverage ratios indicate a companys ability to cover financial charges of interest.
Interest Coverage Ratio:
The interest coverage ratio compares the earnings available to meet the interest obligation.
EBIT
Interest Coverage Ratio =
Interest Charges
(Amount in Rs. 000)
Interest Coverage Ratio (GSK)

Year EBIT Interest Charges Ratio (times)
2013 1969089 159217 12.4

2012 2369259 47512 49.9
(Amount in Rs. 000)
Interest Coverage Ratio (Abbott)

Year EBIT Interest Charges Ratio (times)
2013 25.83 0.02069 1248.03
2012 21.43 0.0146 1467.8
Interest Coverage Ratio Trend Analysis
1600 1467.8
1400 1248.03
1200
1000
Series1
800
Series2
600
400
200 49.9 12.4
0
2012 2013
Interpretation:
The interest coverage ratio of GSK Pakistan for 2013 is 12.4 times which is very low as
compared to last year 2012. On the other hand, the ratio of Abbott Pakistan for 2013 is 1248.03
times which is quite low as compared to last year 2012. This decrease in interest coverage for
GSK is due to two reasons: The Company has very low EBIT as compared to previous year and
very high interest charges. So, comparatively Abbott is in a good position but still it needs to
increase its cover interest.

Activity Ratios:
An activity ratio relates information on a companys ability to manage its resources efficiently.
Receivable Turnover Ratio:

It indicates quality of receivables and how successful the company is in its collections.
Annual Net Credit Sales

Receivable Turnover Ratio =
Closing Receivable
(Amount in Rs. 000)
Receivable Turnover Ratio (GSK)

Year Net Credit Sales Closing Receivables Ratio (times) Average Collection Period
2013 25230878 349950 72.1 5 days
2012 23149964 350362 66.1 5 days
(Amount in Rs. 000)
Receivable Turnover Ratio (Abbott)

Year Net Credit Sales Closing Receivables Ratio (times) Average Collection Period
2013 17217258 79269 217.2 1.6 days
2012 15215253 80766 188.4 1.9 days
Receivable Turnover Trend Analysis
250
217.2
188.4
200
150
Series1
100 72.1 Series2

66.1
50
0
2012 2013
Interpretation:

The receivable turnover ratio for GSK Pakistan is showing a better picture as compared to
previous year. The company can collect its receivables 72 times in a year and after every 5 days.
On the other hand, Abbott is showing a much better picture as compared to it. The company
can collect its receivables 217.2 times in a year and after every 1.6 days only. This is a very good
picture because it is usually recommended for a company to decrease the time for its
receivables / collections in order to make sure that enough cash is available for business
operations. Thus, Abbott is showing a comparatively consistent performance which is good.
Payable Turnover Ratio:

It indicates the promptness of payment to suppliers by company.
Annual Credit Purchases

Payable Turnover Ratio =
Closing Payable
(Amount in Rs. 000)
Payable Turnover Ratio (GSK)

Year Annual Credit Purchases Closing Payables Ratio (times) Days
2013 58395005 5561429 10.5 35
2012 50564339 3950339 12.8 28
(Amount in Rs. 000)
Payable Turnover Ratio (Abbott)

Year Annual Credit Purchases Closing Payables Ratio (times) Days
2013 21706162 2217177 9.79 37
2012 20460782 2432911 8.41 43

Payable Turnover Trend Analysis
14 12.8
12 10.5
9.79
10 8.41
8 Series1
6 Series2
4
0
2012 2013
Interpretation:
GSK Pakistan is showing a good picture of Payable turnover ratio as compared to previous year.
The company now only pays 10 times in year, to its suppliers and makes payment after every 35
days which is very good. On the other hand, Abbott now only pays 9.8 times in year, to its
suppliers, but makes payment after every 37 days which is comparatively less good. It is usually
recommended for companies to delay the payment cycle and GSK Pakistan is performing
comparatively well in this regard.

Inventory Turnover Ratio:

It indicates the effectiveness of the inventory management practices of the firm.
Cost of goods sold
Inventory Turnover Ratio =
Closing Inventory
(Amount in Rs. 000)
Inventory Turnover Ratio (GSK)

Year Cost of goods sold Closing Inventory Ratio ITO in days
2013 19007165 6427953 3.0 122
2012 17104983 5220911 3.3 111
(Amount in Rs. 000)
Inventory Turnover Ratio (Abbott)

Year Cost of goods sold Closing Inventory Ratio ITO in days
2013 10595612 3198175 3.3 111
2012 9513425 2402758 3.4 107
Inventory Turnover Trend Analysis
125 122
120
115 111 111

Series1
110 107
Series2
105
100
95
2012 2013
Interpretation:
If we see the Inventory Turnover in days, we see that the performance is not very good. GSK
Pakistan is converting its inventory into sales after every 122 days, which is a delayed period as
compared to the Abbotts Inventory turnover in days of 2013 where company is moving
inventory into sales after every 111 days. Though the difference is not very large, but GSK
should try improving and minimizing the difference in number of days. The inventory account
should not pile up and it should be made sure that company is effectively converting its stock /
inventory into sales in a short period of time.
Total Assets Turnover Ratio:
It indicates the overall effectiveness of the company in utilizing its assets to generate sales.
Net Sales
Total Assets Turnover Ratio =
Total Assets
(Amount in Rs. 000)
Total Assets Turnover Ratio (GSK)

Year Net Sales Total Assets Ratio
2013 25230878 17938810 1.4:1
2012 23149964 16250523 1.4:1
(Amount in Rs. 000)
Total Assets Turnover Ratio (Abbott)

Year Net Sales Total Assets Ratio
2013 17217258 11168004 1.54:1
2012 15216253 9329862 1.6:1

Total Assets Turnover Trend Analysis
1.65
1.6
1.6
1.54
1.55
1.5 Series1
1.45 Series2
1.4 1.4
1.4
1.35
1.3
2012 2013
Interpretation:
The total asset turnover ratio for GSK Pakistan is constant as compared to previous year and
stands at 1.4:1. While that of Abbott has decreased. This shows that GSK is comparatively using
its total assets effectively in generating sales and it somehow shows a favorable picture for the
company in terms of its asset utilization and efficiency.
Profitability Ratios:
Profitability ratios compare components of income with sales.
Gross Profit Margin:

It is the ratio of gross income or gross profit to sales / revenue.

Gross Profit Margin = 100

(Amount in Rs. 000)
Gross Profit Margin (GSK)

Year Gross Profit Net Sales Ratio (%)
2013 6223713 25230878 24.7
2012 6044981 23149964 26.1

(Amount in Rs. 000)
Gross Profit Margin (Abbott)

Year Gross Profit Net Sales Ratio (%)
2013 6621646 17217258 38.5
2012 5702828 15216253 37.5
Gross Profit Margin Trend Analysis
45
37.5 38.5
40
35
30 26.1
24.7
25 Series1
20 Series2
15
10
5
0
2012 2013
Interpretation:
GSK Pakistan is showing a negative trend in terms of Gross Profit Margin, whereas Abbott is
showing a positive trend. We can see that Gross Profit %age has decreased as compared to
2012 and GSK has not been able to generate much gross profit out of its total sales. This is not a
favorable picture and this declining trend in GP Margin may be due to the increased cost of
sales, which made the gross profit to go down. The company should consider cutting the cost of
its sales in order to generate higher gross profit.
Net Profit Margin:

Net Profit Margin is the ratio of net income to sales.

Net Profit Margin = 100

(Amount in Rs. 000)

Net Profit Margin (GSK)

Year Net Profit after tax Net Sales Ratio (%)
2013 1062263 25230878 4.2
2012 1326504 23149964 5.7
(Amount in Rs. 000)
Net Profit Margin (Abbott)

Year Net Profit after tax Net Sales Ratio (%)
2013 2528849 17217258 14.7
2012 2090095 15216253 13.7
Net Profit Margin Trend Analysis
16 14.7
13.7
14
12
10
Series1
8
5.7
Series2
6 4.2
4
2
0
2012 2013
Interpretation:
The Net Profit Margin of GSK Pakistan is not showing a good picture and the ratio has
decreased as compared to previous year. While, the ratio has increased in case of Abbott. This
decline in net profit margin for GSK over the year is due to increased expenses as already
shown in Income statement. The company should focus on cutting down its expenses in order
to increase the net profit after expensed and taxes.

Return on Investment:
This ratio provides information on the amount of profit, relative to assets employed to produce
that profit.

Return on investment = 100

(Amount in Rs. 000)
Return on Investment (GSK)

Year Net Profit after tax Total Assets Ratio (%)
2013 1062263 17938810 5.9
2012 1326504 16250523 8.2
(Amount in Rs. 000)
Return on Investment (Abbott)

Year Net Profit after tax Total Assets Ratio (%)
2013 2528849 11168004 22.6
2012 2090095 9329862 22.4
Return on Investment Trend Analysis
25 22.4 22.6
20
15
Series1
10 8.2 Series2
5.9
5
0
2012 2013
Interpretation:

The ROI %age for GSK Pakistan has decreased over the year, while it has increased for Abbott.
This is a major decline for GSK if we compare the figure with ROI of previous figure and does
not show a good picture of companys performance in asset utilization and efficiency. The
company has not been able to produce considerable amount of profit using its assets and
should start focusing this area.
Return on Equity:
It indicates the profitability to the shareholders of the company (after all expenses and taxes).

Return on equity = 100

(Amount in Rs. 000)
Return on Equity (GSK)

Year Net Profit after tax SH Equity Ratio (%)
2013 1062263 11349313 9.4
2012 1326504 11393438 11.6
(Amount in Rs. 000)
Return on Equity (Abbott)

Year Net Profit after tax SH Equity Ratio (%)
2013 2528849 8747265 28.9
2012 2090095 6707394 31.2

Return on Equity Trend Analysis
35 31.2
28.9
30
25
20 Series1
15 11.6 Series2
9.4
10
0
2012 2013
Interpretation:
The return on equity ratio has also decreased for both Abbott and GSK and this is not a good
picture. The company purpose is to maximize the profit and shareholders wealth but in 2013,
GSK Pakistan has not been able to achieve this properly. Same is the case for Abbott. The
shareholders might not be getting higher return on their investment in capital.
Market Ratios:
Market Ratios are concerned with the return on investment for shareholders, and with the
relationship between return and the value of an investment in companys shares.
Earnings per Share (EPS):

EPS relates to the portion of a company's profit allocated to each outstanding share of common
stock. It serves as an indicator of a company's profitability.

Earnings per share =
.
(Amount in Rs. 000)
Earnings per Share (GSK)

Year Net Income after tax No. of common shares outstanding Ratio (Rs.)
2013 1062263 289516 3.7

2012 1326504 289516 4.6
(Amount in Rs. 000)
Earnings per Share (Abbott)

Year Net Income after tax No. of common shares outstanding Ratio (Rs.)
2013 2528849 97903.56 25.83
2012 2090095 97896.72 21.35
Earning per Share Trend Analysis
30
25.83
25
21.35
20
Series1
15
Series2
10
4.6 3.7
5
0
2012 2013
Interpretation:
EPS has decreased for GSK Pakistan but increased for Abbott. This is due to increased net
income after tax in 2013 of Abbott due to its comparatively less high expensed and financial
costs. So, GSK should consider increasing the net income so that there is high EPS for its
shareholders.

Dividend per Share (DPS):
Dividend per share (DPS) is the total dividends paid out over an entire year in terms of total
number of outstanding shares.

Dividend per share =
.
(Amount in Rs. 000)
Dividend per Share (GSK)

Year Dividend Paid No. of common shares outstanding Ratio (Rs.)
2013 1013300 289516 3.5
2012 1052800 263200 4.0
(Amount in Rs. 000)
Dividend per Share (Abbott)

Year Dividend Paid No. of common shares outstanding Ratio (Rs.)
2013 683572 97903.56 6.98
2012 684962 97896.72 6.99
Dividend per Share Trend Analysis
8
6.99 6.98
7
6
5 4
3.5 Series1
4
Series2
3
2
1
0
2012 2013
Interpretation:

The DPS for GSK has decreased in 2013 while it has remained constant for Abbott. This is again
not a good picture for GSK. Dividends are a form of profit distribution to the shareholder.
Having a growing dividend per share can be a sign that the company's management believes
that the growth can be sustained.
Net Capital:
Net Capital is the difference of total assets and total liabilities.
Net Capital = Total Assets Total Liabilities
(Amount in Rs. 000)
Net Capital (GSK)

Year Total Assets Total Liabilities Net Capital (Rs.)
2013 17938810 6589497 11349313
2012 16250523 4857085 11393438
(Amount in Rs. 000)
Net Capital (Abbott)

Year Total Assets Total Liabilities Net Capital (Rs.)
2013 11168004 2420739 8747265
2012 9329862 2622468 6707394

Net Capital Trend Analysis
12000000 11393438 11349313
10000000
8747265
8000000
6707394
6000000
4000000
2000000
0
2012 2013
Interpretation:
There is a declining trend in net capital of GSK Pakistan from 2012 to 2013. On the other hand,
there is a rising trend in net capital of Abbott Pakistan from 2012 to 2013. This shows that the
total assets of Abbott have increased with the ratio of decrease in total liabilities over the year.
So, GSK should start focusing this area as well.

Dividend Yield Ratio:

It shows how much a company pays out in dividends each year relative to its share price.

Dividend Yield Ratio =
Dividend Yield Ratio (GSK)

Year DPS (Rs.) Market Price (Rs.) Ratio (%)
2013 3.5 136.2 2.6
2012 4 73.3 5.5
Dividend Yield Ratio (Abbott)

Year DPS (Rs.) Market Price (Rs.) Ratio (%)
2013 7 388.9 1.8
2012 7 225.8 3.1
Dividend Yield Ratio
6 5.5
4
3.1
2.6 Series1
3
1.8 Series2
2
0
2012 2013
Interpretation:
GSK Pakistan has low dividend yield ratio with an increase in market price of share. The
dividend yield ratio of Abbott is decreasing but not abruptly like GSK. This is not a
comparatively favorable picture for GSK because now it is paying a very low dividend %age with
high market price which is not convenient for a shareholder.

Price Earning (P/E) Ratio:
This ratio shows how much investors are willing to pay against market price.

Price Earnings Ratio =

Price Earning Ratio (GSK)

Year Market Price (Rs.) EPS (Rs.) Ratio (Times)
2013 136.2 3.7 37
2012 73.3 4.6 16
Price Earning Ratio (Abbott)

Year Market Price (Rs.) EPS (Rs.) Ratio (Times)
2013 388.9 25.83 15.1
2012 225.8 21.35 10.6
Price Earning Ratios Trend Analysis
40 37
35
30
25
20 16 Series1
15.1
15 Series2
10.6
10
5
0
2012 2013
Interpretation:

The high Price earning ratio of GSK Pakistan in 2013 indicates positive future performance and
investors may be willing to pay more for companys shares. On the other hand, the Abbott P/E
ratio is also higher but not as much as of GSK. So, it shows it is advancing with less pace
comparatively.


Findings & Summary
The findings and summary of financial analysis of GSK Pakistan for the years 2012 and 2013 are
given below:
There is a potential problem in inventories account of GSK, as shown by lower Current

and Quick Ratios. Comparatively, Abbott is managing its inventories and liabilities well.
GSK is not using long term debt financing at a very high level
The companys ability to cover interest charges has reduced as compared to Abbott.
GSK is showing a positive picture of payable turnover but Abbott is performing better in
receivable turnover and inventory turnover. This shows that in case of Abbott,
inventories are not piled up for a greater period of time and thus more converted into
sales
Gross Profit Margin, Net Profit Margin, Return on Investment and Return on Equity is in
a decreasing trend for GSK while shows an increasing trend for Abbott. Reasons include
comparatively high cost of sales, high operational expenses and financial costs of GSK.
Earning per share (EPS) and dividend per share (DPS) are in decreasing trend for GSK
while is in increasing trend for Abbott.
Higher price earning (P/E) ratio of GSK indicates its comparatively more potential
growth in future time
Conclusion
After looking at all financial results of GSK and Abbott Pakistan for 2012 and 2013, we arrive at
the conclusion that there is a negative trend in performance of GSK but there are indicators of
potential growth in future as well. SO, it is better for GSK to decrease the expenses and costs
moving forward, so that its overall profit increases than that of Abbott. GSK Pakistan is
considered as one of the leading companies in pharmaceutical industry of Pakistan and it is
expected that company performance will improve in future.








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Financial Management MBAE2014-2016

Institute of Business Administration | 1

Company Profile & Introduction.............................................................................................. 5

Institute of Business Administration | 2

Return on Investment: ................................................................................................... 41

Institute of Business Administration | 3

Institute of Business Administration | 4

Company Profile & Introduction

Abbott Laboratories (Pakistan) Limited is engaged in the manufacture, import and

Institute of Business Administration | 5

Institute of Business Administration | 6

Company Profile & Introduction

GlaxoSmithKline one of the world's leading research-based pharmaceutical and healthcare

As a leading international pharmaceutical company GSK makes a real difference to global

Institute of Business Administration | 7

Institute of Business Administration | 8

Abbott Pakistan Products & Brands

Institute of Business Administration | 9

Institute of Business Administration | 10

GSK Pakistan Products & Brands

Institute of Business Administration | 11

Institute of Business Administration | 12

Institute of Business Administration | 13

Financial Analysis Common Size:

Balance Sheet of Abbott

Share Capital & Reserves

Total Liabilities & Shareholders equity 11168004 9329862 100.0 100.0

Institute of Business Administration | 14

Balance Sheet of GSK

Share Capital & Reserves

Institute of Business Administration | 15

Institute of Business Administration | 16

Common Size Analysis of Profit & Loss Account:

Profit & Loss Account of Abbott

Net Sales 17217258 15216253 100.0 100.0

Selling & distribution expenses 2471404 2212421 14 14.5

Profit & Loss Account of GSK

Net Sales 25230878 23149964 100.0 100.0

Selling, marketing & distribution expenses 3635914 3028264 14.4 13.1

Institute of Business Administration | 17

Taxation 747609 995243 3.0 4.3

Institute of Business Administration | 18

Institute of Business Administration | 19

Financial Analysis Index Analysis:

Balance Sheet Index Analysis of Abbott (Base Year = 2012)

Regular Figures (Rs. In 000) Index (%)

Share Capital & Reserves

Total Liabilities & Shareholders equity 11168004 9329862 119.7 100.0

Balance Sheet Index Analysis of GSK (Base Year = 2012)

Institute of Business Administration | 20

Regular Figures (Rs. In 000) Index (%)

Institute of Business Administration | 21

Institute of Business Administration | 22

Index Analysis of Profit & Loss Account

Profit & Loss Account of Abbott

Net Sales 17217258 15216253 113.2 100.0

Selling & distribution expenses 2471404 2212421 111.7 100.0

Profit & Loss Account

Net Sales 25230878 23149964 109.0 100.0

Selling, marketing & distribution expenses 3635914 3028264 120.1 100.0

Taxation 747609 995243 75.1 100.0

Institute of Business Administration | 24

Financial Ratio Analysis

Institute of Business Administration | 25