Financial Comparison and Analysis: AstraZeneca PLC and GlaxoSmithKline PLC

AstraZeneca PLC & GlaxoSmithKline PLC
Financial Comparison & Analysis
3



Figure 16. Dividend Cover
Figure 15. Profit After Interest and Tax
Introduction
This report will analyse and compare the two pharmaceutical companies GlaxoSmithKline PLC (GSK) and AstraZeneca in terms of their financial performance. These companies will be evaluated with regard to their financial ratios. Financial ratios give a clear picture of the financial health of a business and are very useful for comparing different companies.
Pharmaceutical industry
A single company does not operate apart from its environment. Economic structure and the actions of other competitors affect any company's success. Therefore in order to analyse and compare companies in terms of financial performance, the industry in which they conduct business should be evaluated. Pharmaceutical industry can be defined as an industry which develops, produces, and markets licensed drugs or biologicals for human and veterinary use. The pharmaceutical industry has doubled in value since 2000. According to IMS Health (2014) world pharmaceutical market sales reached US$874 billion in 2013. The 10 largest drugs companies control over one-third of this market, several with sales of more than US$10 billion a year and profit margins of about 30% (WHO, 2014). The industry has a very competitive structure. While large-scale and research based companies develop medicines and vaccines, smaller companies produce generic medicines. As world population is rising and diseases which require long term management is increasing the pharmaceutical industry is going to grow. Spending on medicines globally is expected exceed US$1.17Tn by 2017(IMS Health, 2014a) On the other hand, there are some challenges, such as maintaining R&D productivity, pricing pressure, patent expiries have impact on pharmaceutical sector as well.
AstraZeneca PLC
AstraZeneca was established in 1999 through the merger of Astra AB of Sweden and Zeneca Group PLC of the UK. AstraZeneca specialized in the discovery, development, manufacturing and marketing of prescription medicines. Its product pipeline is focused on six important areas of healthcare: cancer, cardiovascular, gastrointestinal, infection, neuroscience, and respiratory and inflammation. Currently employing around 50,000 people worldwide AstraZeneca is among the top ten healthcare companies in the world (IMS Health, 2014b). Geographically, U.S. is the largest market of AstraZeneca during 2013, accounting for 38%. On the other hand, Europe and emerging markets were responsible for 26% and 21% of sales, respectively (AstraZeneca, 2013).
GlaxoSmithKline PLC (GSK)
GSK was established in 2000 by the merger of Glaxo Wellcome PLC and SmithKline Beecham PLC. It is currently world fifth largest pharmaceutical company and the largest healthcare company in the U.K. (IMS Health, 2014b) employing around 100,000 people worldwide. The company has three primary business areas: Pharmaceuticals, Vaccines, and Consumer Healthcare. Geographically, GSK's revenues outside the U.S. and Europe account for about 40% of its total sales during 2013, being therefore very well exposed to developing markets (GSK, 2013), contrary to AstraZeneca.
Overview of report
This report evaluates and compares the two UK-based pharmaceutical companies in terms of their financial performance by analysing their financial ratios during the period of 2009-2013. Financial ratios will be analysed with regard to following categories: Profitability, liquidity, efficiency, gearing and investment. All financial ratios are calculated by using Financial Statements of both companies and exist in the Appendix. In the end, by evaluating all outcomes of financial statements and ratios, the question of 'which company is a good option to invest?' will be answered for potential investors.







Ratio Analysis
Profitability Ratios
Return on Capital Employed (ROCE)

First of all, profitability of the two companies will be compared through the key profitability ratios. To begin with ROCE of two companies, we can see from the Figure 1, ROCE in GSK and AstraZeneca fluctuated from 2009 until 2011. After the year 2011, AZ saw a sharp decline in ROCE while GSK's ratio decreased slightly.

Looking at AstraZeneca's figures, obviously, main reason behind decline in ROCE is deterioration of operating profit. As it is stated in the Annual Report, the sharp decrease in ROCE in 2012 and 2013 is stemmed from the reported operating profit which was down 24% and 51% respectively. In order to analyse this downward pattern, structure of operating profit for the final three year should be evaluated in more detail from the Table 1.






Table 1. Horizontal Analysis of some figures from AstraZeneca's Income Statements

2011
2012
2013

Actual figures
Base figure
Actual figures
Comparison with 2011 (%)
Actual figures
Comparison with 2012 (%)
Revenue
33,591
100
27,973
83
25,711
92
Cost of sales
-6,026
100
-5,393
89
-5,261
98
Gross profit
27,565
100
22,580
82
20,450
91
Administrative expenses
-17,030
100
-15,402
90
-17,333
113
Profit on disposal of subsidiary
1,483
100
---

---

Other operating income & expense
777
100
970
125
595
61
Operating profit
12,795
100
8,148
66
3,712
49

Chairman of AstraZeneca defined 2012 financial performance as a 'significant revenue decline associated with the loss of exclusivity for several products.' Looking at the revenue figure of AstraZeneca of 2012, it was down 17% to $27,973 million compared with 2011. According to Annual Report of 2012 loss of exclusivity on several brands, most notably Seroquel IR, and the disposals of Astra Tech and Aptium were the key drivers of the revenue decline. Furthermore, decline in operating profit was much more significant than revenue. In 2012, operating profit was down 34% (almost twice as the decline in revenue) compared with the 2011. In 2013 loss of exclusivity continued to have negative effect on AstraZeneca. According to Annual Report of 2013, loss of exclusivity on brands accounted for a revenue decline of some $2.2 billion. In 2013, operating profit was down 51% compared with the 2012. Over the coming years, it is forecasted that this trend will continue as some medicines continue to lose exclusivity in US and Europe markets. Another significant development which had impact on operating profit in 2013 is $1,758 million impairment due to disappointing sales of diabetes drug Bydureon, according to WSJ (6 February 2014).
All in all, it can be claimed that GlaxoSmithKline has been more profitable company in terms of return on capital employed than AstraZeneca after 2011.
Return on Total Assets (ROTA)
As it can be seen from the Figure 2 AstraZeneca's ROTA figures prevailed over the GSK's figures between 2009 and 2011. However, AstraZeneca had a sharp decline in ROTA in 2012 and 2013 due to above-mentioned decrease in operating profit meanwhile GSK saw a slightly decrease.

Table 2 shows the components of ROTA for both companies during 2009-2013. It is obvious from the table; the deterioration of ROTA is stemmed not only from decrease in operating profit but also increase in total assets for both companies. The decline in operating profit for AstraZeneca was much more significant than GSK after 2011. The main reason behind the decrease in operating profit for AstraZeneca is decline in revenue due to loss of exclusivity for several products which was mentioned in Section 2.1.1.
Table 2. Return on Total Assets (ROTA) of AstraZeneca and GlaxoSmithKline (2009-2013)

AZ
GSK
YEAR
OPERATING PROFIT
TOTAL ASSETS
OPERATING PROFIT
TOTAL ASSETS
2009
11,543
54,920
8,425
42,862
2010
11,494
56,127
3,783
42,230
2011
12,795
52,830
7,807
41,080
2012
8,148
53,534
7,392
41,475
2013
3,712
55,899
7,028
42,086

Return on Equity (ROE)
Return on equity (ROE) is another important profitability ratio. This ratio measures the profitability of a company with regard to the capital provided by the ordinary shareholders. Figure 3 demonstrates that the ROE trends of both companies during the period. As can be seen from the graph, after having seen a sharp decline in 2010 GSK's ratio increased year by year. On the other hand, AstraZeneca's figure grew erratically between 2009 and 2011, and decreased dramatically for the last two years. In order to understand these patterns, the components of the ratio should be evaluated also.
Looking at GSK, main reason behind the decline in annual profit of 2010 is the expansion of the Operational Excellence programme which was announced in February 2009, according to Financial Review of 2010. With an estimated total cost of approximately £4.5 billion, 75% of the costs of this programme were incurred by the end of 2010. One of the outstanding restructuring costs which were incurred in 2010 is acquisition of Stiefel Laboratories Inc., which was about a $2.9 billion deal, according to WSJ (20 April 2009).


Operating Profit Margin
Another important ratio for analysing both of the company is operating profit margin which measures the two companies' operating performance. Operating profit margin for GSK was almost constant at about 30% during the period except the year 2010. As it is stated in the Annual Report of 2010, due to restructuring costs related to the Operational Excellence programme and the acquisitions of Reliant and Stiefel, there was a decrease of 59% in operational profit which is about £2,438, compared with the 2009. On the other hand, after reaching its peak at 38.09% in 2012, AstraZeneca saw a sharp decline in operating profit margin for the last two years. Figure 4 shows that there is something wrong for AstraZeneca in 2012 and 2013 with regard to operating profit margin ratio.


In order to understand sharp decline in operating profit margin, we need to analyse the components of the ratio in more detail. Figure 5 demonstrates structure of operating profit margin for AstraZeneca for the period of analysis. Although revenue, denominator of the ratio, was decreasing year by year after 2011, downward trend in operating profit was much more significant. As it is stated in the Annual Report of 2013, the decline in operating profit was greater than the decline in revenue primarily due to expenditure associated with the AstraZeneca's key growth platforms and strengthened pipeline. On the other hand, Chairman stated that the decline in revenue was, in part, offset by the key growth platforms: Brilinta, diabetes franchise, respiratory, Emerging Markets and Japan, which delivered an incremental $1.2 billion of revenue in 2013.


Liquidity Ratios
Quick Ratio
In order to compare the ability of covering short term obligations, Figure 6 demonstrates quick ratios for GSK and AstraZeneca for the period of 2009-2013. While AstraZeneca's quick ratios were above 1 for the period, GSK's quick ratios were under 1, meaning current assets (except inventory) are not big enough to cover current liabilities. Though AstraZeneca's ratios are better with regard to liquidity than GSK's ratios, it is useful to analyse the companies' profitability ratios also. As analysed earlier, profitability figures for GSK were better than AstraZeneca. Therefore, despite the fact that GSK's quick ratios are below 1, 'pharmaceutical giant' is not in trouble with regard to liquidity because of good profitability performance.


Efficiency Ratios
Day sales of inventory
'Day sales of inventory' ratio measures a company's performance that how long it takes a company to turn its inventory into sales. Averaged inventory turnover for AstraZeneca is 118 days while for GSK is 185 days during the five-year period. Figure 7 compares how fast AstraZeneca and GSK turn over their inventory within a year. While GSK's stock of inventory lasted in 166-201 days, it took 96-139 days for AstraZeneca to sell its entire inventory in the recent years. In this view, AstraZeneca has been more efficient company than its competitor as shorter day sales of inventory means the inventory can be converted into cash sooner.


Asset turnover
Figure 8 shows asset turnover ratio of two pharmaceutical giants between 2009 and 2013. It is obvious that GlaxoSmithKline's asset turnover figures prevailed over AstraZeneca's figures during the period. As can be seen from Table 3, although AstraZeneca's assets are more than GSK during five-year period, the latter had better asset turnover performance over the period. This means, GSK has used its assets more efficiently to generate revenue than AstraZeneca between 2009 and 2013.









Table 3. Asset Turnover of AstraZeneca and GlaxoSmithKline
(2009-2013)
 
2009
2010
2011
2012
2013
AstraZeneca
Sales
32,804
33,269
33,591
27,973
25,711

Net assets
20,660
23,213
23,246
23,737
23,224

Asset Turnover (times)
1.6
1.4
1.4
1.2
1.1
GSK
Sales
28,368
28,392
27,387
26,431
26,505

Net assets
10,742
9,745
8,827
6,747
6,737

Asset Turnover (times)
2.6
2.9
3.1
3.9
3.9

AstraZeneca's asset turnover ratio decreased during 2012 and 2013. In order to understand this downward trend, the components of the asset turnover ratio should be evaluated. As it can be understood from the Figure 9, asset turnover of AstraZeneca decreased in 2012 and 2013 due to significant deterioration of sales revenue. AstraZeneca's sales in 2012 were down 15% to $27,973 million and in 2013 were down 6% to $25,711 million. According to Chairman, most of the revenue decline was related to loss of exclusivity on several
brands, such as Arimidex, Atacand, Crestor, Nexium and Seroquel IR, in the portfolio. Although the decline in revenue was, in part, offset by key growth platforms in 2013, over the coming years, it is forecasted that this trend will continue as medicines such as Crestor, Nexium and Seroquel XR continue to lose exclusivity in some markets. Therefore this trend is likely affect sales revenue negatively over the coming years.


Sales Revenue to Capital Employed
Figure 10 shows that sales revenue to capital employed figure for GSK and AstraZeneca between 2009 and 2013. The sales revenue to capital employed for AstraZeneca averaged 0.8 times while GlaxoSmithKline averaged 0.96 times during the period. As can be seen from the Figure 10, while GSK's ratios are almost constant and prevailed over its competitor's figures, AstraZeneca saw a decline trend after 2011. AstraZeneca's figure stood at 0.91 times in 2011 and slightly decreased year by year reaching 0.65 times in 2013.



In order to understand the downward trend of AstraZeneca in terms of sales revenue to capital employed, the components of the ratio should be evaluated during the period. Figure 11 demonstrates the structure of sales revenue to capital employed figure between 2009 and 2013.

As can be seen from the Figure 11, deterioration of sales revenue to capital employed ratio was caused from the above-mentioned decrease of sales revenue in 2012 and 2013. Although capital employed has an upward trend, extra capital employed was not properly reflected in revenue.
Gearing Ratios
Gearing (Debt to Equity) Ratio
Figure 12 shows that gearing (debt to equity) figure for GSK and AstraZeneca between 2009 and 2013. The debt to equity ratio for AstraZeneca averaged 27.64% while GSK averaged 64.58% during the period. AstraZeneca's figures have been below 50% during five years meaning AstraZeneca has been mostly funded by shareholders' capital rather than borrowing. On the other hand, as GSK's figures fluctuated between approximately 60% and 71% during the five year period, it is in a risky situation. A high debt to equity ratio generally means that a company has an aggressive strategy in financing its operations with debt. This situation may affect a company negatively due to additional interest expense.
According to Annual Report of 2013, GSK's policy is described as "to borrow centrally in order to meet anticipated funding requirements." Moreover it is stated that company's long-term credit ratings have remained unchanged since February 2008 and current ratings are A+ (stable outlook) by Standard and Poor's and A1 (negative outlook) by Moody's. However, in August 2014, Moody's (2014) downgraded GSK's credit rating to A2 from A1(Telegraph, 5 August 2014).



While GlaxoSmithKline's debt to equity ratio currently stands at an extremely high level of 220%, meaning that for every £1 of equity, GlaxoSmithKline currently has £2.20 of debt, the company's relatively high level of profitability means that debt levels are seems to be well-serviced. However, in order to have a judgement, GSK's interest coverage ratio should be analysed as well.

Interest Coverage Ratio
Figure 13 shows that interest cover ratio for GSK and AstraZeneca between 2009 and 2013. The interest cover ratio for AstraZeneca averaged almost 11 while GSK averaged 9 during the period. This means AstraZeneca and GSK have ability to pay their interest payments on debt 11 times and 9 times respectively, by their operating profit. Although GSK has a high level of debt to equity ratio, mentioned in section 2.4.1, it is likely to have opportunity to make its interest payments on debt.



Looking at AstraZeneca's interest coverage trend from Figure 13, it climbed rapidly from 2009, stood at its peak of 14.9 by 2012 and was down 50% in 2013. Therefore there is something wrong for AstraZeneca in 2013 in terms of interest coverage. In order to understand sharp decline, the components of interest coverage ratio should be evaluated. Figure 14 shows the components of interest coverage ratio for AstraZeneca. Although interest payable, denominator of the ratio, decreased in 2013, above-mentioned downward trend in operating profit was much more significant. All in all, it can be said that both GSK and AstraZeneca is safe with regard to interest cover.



Investment Ratios
Earnings per share (EPS)
EPS, as a measurement of a company's profitability per unit of shareholder ownership, is one of the most important ratios for an investor. Table 4 demonstrates EPS figures for both companies. EPS of AstraZeneca experienced an upward trend from 2009 and reached a peak of 464 p in 2011 and saw a sharp decline by 2013. In 2012 reported EPS was down 29% which was lower than the decline in core operating profit. According to Annual Report of 2012 this was the result of the benefits from net share repurchases and a lower tax rate. Furthermore reported EPS for the year 2013 was down 55% to 124.4 p. Annual Report of 2013 reveals that one of the most significant reasons for this decline is the impairment of Bydureon in the fourth quarter of 2013 which reduced reported EPS by $1.10
On the other hand, GSK's EPS, beginning from 109 p in 2009, demonstrated a sharp decline by 2010 and increased and reached its peak of 110.5 p in 2013. According to Annual Report of 2010 the reason of this decline was impact of legal cost of £4,001 million. Both companies' EPS trends are broadly in line with their profit after interest and tax figures.






Table 4. Diluted EPS for AstraZeneca and GlaxoSmithKline (2009-2013)

AstraZeneca
GSK
Years 
Diluted EPS (p)
Issued shares (m)
Diluted EPS (p)
Issued shares (m)
2009
321.8
1,448
108.2
5,069
2010
362.1
1,438
31.9
5,085
2011
464.0
1,361
102.1
5,028
2012
306.3
1,261
90.2
4,912
2013
124.4
1,252
110.5
4,831
Figure 15 shows profit after tax interest and tax figures for each company during five-year period. As can be seen from the Figure 15, beginning from the year 2009, AstraZeneca demonstrated an upward trend and reached its top in 2011 and decreased dramatically over the final two years. In 2012 reported profit after interest and tax was down 37% to $6,297 million compared with the 2011. This decline was mostly related to loss of exclusivity on several brands in the portfolio, combined with the higher Core R&D and SG&A expenses, according to Press Release dated 31 January 2013 (AstraZeneca, 2013). Bloomberg (4 February 2013) wrote that AstraZeneca faced increasing competition from lower-priced generic medicines which decreased its profit. In 2013 reported profit after interest and tax was down 60% to $2,556 million compared with the 2012 figures. According to Telegraph (6 February 2014) AstraZeneca was under increasing pressure as cheaper competitors to its best-sellers come onto the market which affected its sales. Moreover it was forecasted that new generic competitors would erode its sales further.


Price Earnings Ratio (P/E)
PE is an important ratio which shows a company's current share price compared to its per-share earnings. This ratio is closely followed by investors as it is likely to affect investment decisions directly. Table 5 demonstrates PE ratio for both companies. As can be seen from the table, GSK's ratio was higher than AstraZeneca's in 2011 and 2012. However in 2013 AstraZeneca's P/E ratio increased significantly and was almost twice as GSK's. It's obvious that sharp increase in P/E ratio stemmed from decrease in EPS accompanied with increase in market prices. 2013. Nevertheless, comparing with the GSK, high P/E ratio of AstraZeneca means investors are expecting higher earnings growth in the future. With regard to GSK, its EPS and market share price are relatively stable during the period.

Table 5. P/E ratio for AstraZeneca and GSK (2011-2013)
 
AZ
GSK
Years
PE ratio
Market price share
EPS
PE ratio
Market price share
EPS
2011
6.4
2,975.0
464.0
12.6
1289
102.1
2012
9.5
2,909.5
306.3
15.8
1422
90.2
2013
28.7
3,574.5
124.4
14.6
1618
110.5

Dividend cover
Figure 16 shows that dividend cover figure for GSK and AstraZeneca between 2009 and 2013. The dividend cover ratio for AstraZeneca averaged 2.01% while GSK averaged 1.31% during the period. Normally a dividend cover ratio below 1.5 is regarded as risky and a ratio below 1 indicates a company is paying the current year's dividend with retained earnings from a previous year. As can be seen from the Figure 16, dividend cover ratio for GSK in 2010 and AstraZeneca in 2013 were below 1. GSK's low dividend cover trend was not stable as it increased in 2011. However, with regard to AstraZeneca, as its dividend cover ratio is 0.74 in 2013, the company needs something more than earnings to pay its dividend. AstraZeneca could borrow from their reserves of retained earnings from the year 2012 to pay a dividend. Only for one year this is fine but if this situation acquires continuity it will not sustainable in the long term and generally regarded as a warning sign for a company.

























Conclusion and recommendations
All in all, ratio analysis of the two pharmaceutical companies shows that GSK's financial performance over the past five years has been relatively stable. This is good for investors which presents a high level of predictability in terms of GSK's future performance. Moreover, GSK has been absolutely more profitable company than AstraZeneca. Despite the fact that it has lower ability to cover its short-term obligations than its competitor, its high level of profitability is likely to compensate this deficit.
On the other hand, as GSK has higher gearing ratio compared with its competitor. GSK followed an aggressive strategy to finance its operations with borrowing. This situation may affect a company negatively due to additional interest expense. Looking at its interest coverage, GSK have ability to pay their interest payments on debt 9 times by its operating profit in 2013.
In 2014, GSK has been found guilty of bribery by a Chinese court and has agreed to pay a fine of £297m to the government (Guardian, 19 September 2014). Contrary to expectations, this problem did not affect its share price negatively.
With regard to AstraZeneca, it's obvious that patent expiries had a significant negative impact on its financial performance. In 2013, AstraZeneca's sales and operating profit were down %8 and 51% respectively. Furthermore it's expected that new generic competitors will erode its sales further and 2017 revenues will be broadly in line with those of 2013. Therefore the patent cliff seems to affect the company's financial structure negatively over the next few years.
On the other hand, AstraZeneca had better price earnings ratio, compared to GSK in 2013.This means investors are expecting higher earnings growth in the future. US giant Pfizer attempted to takeover AstraZeneca 70 billion pounds ($118 billion) but the offer was rejected in May 2014 (Reuters, 26 May 2014). In November 2014 Astra Zeneca said that another takeover approach from Pfizer has become less likely after a US clampdown on tax inversions, as the AstraZeneca increased its sales and profit forecasts for the second time in 2014 (Guardian, 6 November 2014).
In conclusion, as it has growth expectations, AstraZeneca could be a better opportunity to invest. On the other hand, as its financial performance relatively stable over the past few years, GSK could be a better investment opportunity for investors who seeks predictability.



References:
Annual Reports
AstraZeneca, 2009, Annual Report
AstraZeneca, 2010, Annual Report
AstraZeneca, 2011, Annual Report
AstraZeneca, 2012, Annual Report
AstraZeneca, 2013, Annual Report
GlaxoSmithKline, 2009, Annual Report
GlaxoSmithKline, 2010, Annual Report
GlaxoSmithKline, 2011, Annual Report
GlaxoSmithKline, 2012, Annual Report
GlaxoSmithKline, 2013, Annual Report

Websites and Newspapers

AstraZeneca (31 January 2013), Available at:< http://www.astrazeneca.com/Media/Press-releases/Article/20130131--astrazeneca-2012-fourth-quarter-and-full-year-results > (Accessed 29 December 2014)

Bloomberg (4 February 2013), Available at: < http://www.bloomberg.com/news/2013-01-31/astrazeneca-fourth-quarter-profit-falls-on-generic-competition.html > (Accessed 28 December 2014)

Guardian (19 September 2014), Available at: (Accessed 30 December 2014)

Guardian (6 November 2014), Available at:< http://www.theguardian.com/business/2014
/nov/06/pfizer-unlikely-astrazeneca-takeover-tax-inversion-clampdown> (Accessed 30 December 2014)

IMS Health, 2014a, Available at< http://www.imshealth.com/portal/site/imshealth/ menuitem. 762a961826aad98f53c753c71ad8c22a/?vgnextoid=9f819e464e832410VgnVCM10000076192ca2RCRD&vgnextchannel=a64de5fda6370410VgnVCM10000076192ca2RCRD&vgnextfmt=default> (Accessed 24 December 2014)

IMS Health, 2014b, Available at (Accessed 24 December 2014).


Moody's, 1 August 2014, Available at: < https://www.moodys.com/research/Moodys-downgrades-GlaxoSmithKline-to-A2-outlook-stable--PR_305316 > (Accessed 26 December 2014)

Reuters (26 May 2014), Available at:< http://www.reuters.com/article/2014/05/26/us-astrazeneca-pfizer-idUSBREA3R0H520140526 >(Accessed 30 December 2014)

The Telegraph (6 February 2014), Available at:< http://telegraph.co.uk/finance/newsbysector /pharmaceuticalsandchemicals/10620977/AstraZeneca-profits-slump-57pc- as-it-battles
-patent-cliff.html, > (Accessed 28 December 2014)

The Telegraph (5 August 2014), Available at:< http://www.telegraph.co.uk/finance/newsby
sector/Pharmaceuticalsandchemicals/11013056/Neil-Woodford-GlaxoSmithKlines-troubles-
are-only-temporary.html > (Accessed 27 December 2014)

World Health Organization, 2014, Available at: (Accessed 24 December 2014)

WSJ (6 February 2014), Available at: (Accessed 25 December 2014)
WSJ (20 April 2009), Available at: (Accessed 25 December 2014)









Appendix
Profitability Ratios
Return on Capital Employed (ROCE)
ROCE=((Profit Before Interest and Tax) / (Capital Employed)) X 100
Profit Before Interest and Tax :Operating Profit
Capital Employed:Total Equity-Non-controlling interests+Noncurrent liabilities
Return on Total Assets (ROTA)
ROCE=((Profit Before Interest and Tax) / (Total Assets)) X 100
Profit Before Interest and Tax = Operating Profit
Operating Profit Margin
Operating Profit Margin=(Operating Profit/Revenues) X 100
Liquidity Ratios
Quick Ratio
Quick Ratio=(Current Assets-Inventory)/Current Liabilities
Efficiency Ratios
Day Sales of Inventory
Day Sales of Inventory=(Inventory/Cost of Goods Sold) X 365
Asset Turnover
Asset Turnover=Sales Revenue/Net Assets
Net Assets:Total Equity-Non-controlling interests
Sales Revenue to Capital Employed
Sales Revenue to Capital Employed=Sales Revenue/Capital Employed
Capital Employed:Total Equity-Non-controlling interests+Noncurrent liabilities
Gearing Ratios
Gearing (Debt to Equity) Ratio
Debt to equity=((Long Term Barrowings/(Long Term Barrowings+Equity))X100
Equity:Total Equity- Non-controlling interests
Interest Coverage Ratio
Interest Coverage Ratio=Operating Profit/Interest Payable
Invesment Ratios
Earnings per share (EPS)
Exist in Annual Reports.
AstraZeneca's EPS figures were converted to pound with the exchange rate at end of December each year which are 0.61, 0.62, 0.64, 0.65, and 0.62 in 2009, 2010, 2011, 2012, and 2013 respectively. Rates were available at:
http://www.xe.com/currencycharts/?from=GBP&to=USD&view=1Y(Accessed 1 January 2015)

Price Earnings Ratio (P/E)
Price Earnings Ratio=Market price share/EPS
Market price shares exist in Annual Reports.
Dividend Cover Ratio
Dividend Cover Ratio=Profit After Interest and Tax/Ordinary Dividends
Profit After Interest and Tax:Profit attrituble to shareholders
Dividends paid figures were found from Cash Flow Statements.


Figure 14. Operating Profit and Interest Payable for AstraZeneca from 2009 to 2013
Figure 5. Operating Profit and Revenue for AstraZeneca from 2009 to 2013(£m)
Figure 4. Operating Profit Margin
Figure 3. Return on Equity
Figure 2. Return on Total Assets
Figure 1. Return on Capital Employed
Figure 6. Quick Ratio
Figure 8. Asset Turnover
Figure 13.Interest Coverage Ratio
Figure 12.Debt-To-Equity Ratio
Figure 7. Day Sales of Inventory
Figure 11. Sales Revenue and Capital Employed for AstraZeneca from 2009 to 2013
Figure 9. Operating Profit and Revenue for AstraZeneca from 2009 to 2013
Figure 10.Sales Revenue To Capital Employed