International Corporate Finance - Analysis of AstraZeneca's Capital Structure, Share Price, and Market Performance

This report provides an analysis of AstraZeneca's capital structure, cost of capital, share price, and market performance. It also discusses the impact of global financial crises and COVID-19 on the UK economy. Additionally, it provides an overview of the international monetary environment and the currency of the country on the foreign exchange market.

International
Corporate Finance

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART 1............................................................................................................................................3
Determine the capital structure of AstraZeneca along with the cost of capital and its
implication on the value of firm..................................................................................................3
Check out the change in share price of AstraZeneca and provide illustration for the risk and
return of firm in the market.........................................................................................................4
Identify a news that relates to the company and its impact on the share price of firm...............4
Analyse the relationship among the performance of AstraZeneca and its relevant market
benchmark index.........................................................................................................................5
PART 2............................................................................................................................................5
Discuss about the international monetary environment of country along with the effect of
international trade flows..............................................................................................................5
Discuss the impact of Global Financial Crises (GFC) in 2008/09 on the economy of country..6
Comment on the impact of Covid – 19 on the economy of nation.............................................7
Provide overview of the currency of country on the foreign exchange market..........................7
Give country level insights on AstraZeneca and its future........................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Corporate finance refers to the manner in which a business organises funds for their
operations in order to reduce their cost and maximize profits. It deals with the cash flows along
with managing the goals of the firm. It focuses on maximising the value for shareholders with
the help of making long and short term plans and framing various strategies for its
implementation (Brewster, 2017). The company chosen in this report is AstraZeneca. It is a UK
based Multinational company dealing in Pharmaceutical and biotechnology. Its headquarters is in
Cambridge, England. The report is divided into two parts. Its first part conducts the analysis at
firm level. It discuss about the capital structure of company and its cost of capital along with
tracing the changes occurring in share price. Their is also an analysis on related news along with
its impact on share price. The second part of the report conducts examination at country level. It
evaluates its monetary environment at international level along with reviewing the impact of
Global Financial Crises in 2008/09. It also takes a loot at the impact of Covid-19 on the
economy. It further provides an overview of the currency on foreign exchange market.
PART 1
Determine the capital structure of AstraZeneca along with the cost of capital and its implication
on the value of firm.
Capital structure can be defined as a mix of equity and debt that is used to provide
finance to the operations and assets of the company. From the point view of corporates, equity
denotes an expensive and permanent source of arranging funds with high flexibility. The
decision of capital structure remains in the hands of the management and board. This choice is
made on the basis of size and maturity of firm and options available to it (Buchanan, Cao and
Chen, 2018).
The capital structure of AstraZeneca comprises of equity capital only. Their are no funds
arranged by firm from debts. It has a hold over the equity of $ 15622m. Out of this, there is a
share capital of $ 328m at a price of $ 0.25 each. In the year 2020, there were no issue of shares
in the market and it remained standing at $ 328m. Its share premium account stands at $ 7971m
with a capital redemption reserve at $ 153m from last few years. It has a merge reserve of $
448m in addition to other reserves of $ 1423m. The retained earnings of firm is $ 5299m.

Cost of capital refers to the return that is expected from a firm to be received on the amount
invested on it. Presently, AstraZeneca is operating at a Weighted average cost of capital of
3.93%. It is always good to have low weighted cost of capital. This helps in improving the value
of business in the market. AstraZeneca is operating in good rate which has made positive impact
on its share price value (Fang, Francis and Hasan, 2018).
Check out the change in share price of AstraZeneca and provide illustration for the risk and
return of firm in the market.
Price of stock changes everyday due to the force of market. It changes with the alteration
in demand and supply of shares which decides the price of the product. If the demand of stock of
firm increases and there is less supply, its value in market also rises high. On contrary, when the
business has lot of shares to sell but their is no demand related to it. Then, the value of stock goes
down. Their is seen a continuous fluctuation in the share prices of AstraZeneca. At present, the
company is standing at a price of $ 3098 per share. A day ago, its price was $ 3093 per share. In
the month of November, its price viewed after two months. On 29th November, the value of
share was $ 3256. Company has not seen such a big rise since September. On 3 September, its
price was $ 3218. But this was low for the firm. This value of shares has fallen from a great
height with a price of $ 4672 in the beginning of the year 2021. Presently, the value of its shares
is very low and accordingly, its value in market in also going down. Now people are taking less
interest in the shares of the company. Risk and return of the company is correlated in its own
terms. Risk is the chance that the investor takes on the investment it puts. The return it the profit
margin on its investments. there is a principle the higher the risk, the higher the return.
Identify a news that relates to the company and its impact on the share price of firm.
On 19 March 2021, it was found that the people who consumed Oxford- AstraZeneca, out
of them some has complaint of blood clots and low platelets. So, WHO validated on 25 March
2021 that the two vaccines of AstraZeneca are safe to be used in emergency. They are effective
and can be recommended for consumption under this pandemic. SAGE (Strategic Advisory
Group of Experts on Immunization) also approved the statement. According to the result of
committee, they stated that the vaccine holds the capacity to prevent people from the infection of
Covid-19 and deaths due to it. Also, this result of clotting is not found in all patients. The
benefits of this vaccine is outweighing the risks associated to it. The use of this vaccine was
suspended in many of the countries in Europe (Fu, 2019).

Share market of any country is directly linked to the news prevailing in market linked to
that firm or any other firm that relates to it. In the same way, the outbreak of this news affected
the price of shares of AstraZeneca to a great extent. When WHO first claimed that two vaccines
of AstraZeneca can be used in this pandemic. It directly impacted its share price and the value of
its share went very high to around $ 4711 per share. But with the coming of news that its vaccine
is creating a problem of blood clots and nations of Europe has banned the use of this medicine,
the value of its stock dropped immediately with a great extent. It come to $ 3127 to $ 3413. This
was great fall seen by the company. After the statement of WHO and SAGE that the vaccine is
suitable for fighting the infection of Covid, it regained its value to some extent and went back to
$ 3305 per share. At present the value of shares are not so good and is maintaining its prices at a
constant value (Glaum, Schmidt and Schnürer, 2018).
Analyse the relationship among the performance of AstraZeneca and its relevant market
benchmark index.
Benchmark index refers to standards on the basis of which the performance of companies
are measured. Usually market segment stock, broad market and bond indexes are used for
solving this purpose. AstraZeneca is operating at a scoring of 3.30 with a ranking of 7. It has
scored 4.32 in governance of access with the ranking of 3 and 2.78 for research and development
and got place at 6th place. Company got the scoring of 3.29 for delivering product with 6th
position. It also performed good in conducting research for medicnes and engaging in multiple
strong health system.
PART 2
Discuss about the international monetary environment of country along with the effect of
international trade flows.
International monetary environment comprises of the whole financial monetary system of
world which constitutes of financial institutions. It provides a framework for ascertaining the
rules and regulations while dealing in payments at global level, knowledge of exchange rates and
movement of capital. It also comprised of gold standards. UK government employed the norms
of printing currency as per the rule provided under this system. The exchange regime of
international level adopted by UK are in accordance with the market forces short run volatility
and medium and large run swings (Grira and et. al., 2019).

Central bank acts to maintain the stability of prices and smooth operation of of
transactions at international level along with managing the payment system. It can alter the rates
of interest and put influence on both inflation as well as exchange rates. They also purchase and
sell foreign currencies for maintaining a balance in exchange rate market. International monetary
environment directly affects the trade flows among countries. They actually work side by side.
When the monetary environment of world is smooth then it helps in continuous flow of trade and
that too with efficiency. While disturbance in the movement of money creartes hurdle in the floe
of trade as well.
Discuss the impact of Global Financial Crises (GFC) in 2008/09 on the economy of country.
With the removal of barrier on moving the money around the world, all financial
institutions connected with each other very closely. When banks found they were running with a
shortage of funds to cover their losses, it spread to other institutions quickly (Hentschel and
Smith, 2020). This raised the situation of liquidity crises. With the contraction of banks, whole
economy of UK was pulled down. At this time, uncountable number of businesses closed and lot
of people lost their jobs. The fall in the GDP of UK was all time of low, even in comparison to
depression of 1930. Prices of houses fallen down and unemployment level also raised. The
employment level of country dropped than expectation. For handling the situation, government
has to reduce the mandatory wages of people. This gave an environment of relaxation to the
employers in relation to making payment to labourers. This helped in managing the employment
level of country to some extent.
At this time, it was important for banks to maintain their liquidity level so that banks can
start their inter landing transactions smoothly. Their was also a need for banks to keep a
particular amount of capital with them so that they are not going out out of liquidity. In addition
to this, banks, too have to ensure that they do not take high level of risk while lending money to
people. For this, government took lot of actions for ensuring that it does not have to face such a
depression in future. They started providing capital to banks by purchasing their shares and
nationalising them. They also put some money in Financial Services Compensation scheme so
that they do not loose their money. They too took many other steps for balancing the economy
like letting cash to some bank directly who were insolvent (Kanagaretnam, Xiu and Zhou, 2019).

Comment on the impact of Covid – 19 on the economy of nation.
The outbreak of Corona virus has made a lot of impact on the economies of whole world.
Though its emergence has benefits some sectors but on the whole it has negative impact on the
economy. It has also adversely affected the economic condition of UK as well. The monthly
gross domestic product of UK has increased by 1.2% in the month of December 2020. But on the
whole, it remained below by a percentage of 6.3 from the levels of February. The services sector
grew by 1.7 % after the relaxation from various restrictions that were imposed due to pandemic.
Their was a growth in production and manufacturing level as well but with a minute rate of 0.2
% and 0.3% respectively. On contrary, construction field fall by 2.9 %. In forth quarter, country
saw a rise of 1 % in GDP following a rise of 16.1 % in prior third quarter. But it was lower by
6.6 % in comparison to rate in previous year (Kim and et. al., 2019).
In forth quarter, all the three important sectors – production, services and construction
rise with their speed and contributed towards the upliftment of GDP. On whole in year 2020, due
to outbreak corona virus, UK faced all time low since last ten years in GDP by 9.9 %. Even the
accommodation and food services of UK also faced a fall by 44.5% in the month of November.
In December, it grew by 25.2 %.Other service sector also saw a growth of 18 % in December
due to increase in the other personal services by 36.9 %. The aviation sector was also affected
heavily due to pandemic. Their was a total ban on the movement of people from one country to
another which affected the operations of flights and income of these countries (Safari, 2017).
Provide overview of the currency of country on the foreign exchange market.
Foreign exchange is a market where currencies of different countries are exchanged. It is
a combination of different markets that operate at their country level. The trade between the
currencies of these nations constitute a foreign exchange market. According to survey, Foreign
exchange market of UK viewed a big rise in average daily turnover between the years of 2016
and 2019. In this time, the country retained the position of being a leading international location
for the purpose of trading of currency. Their are many drivers which are behind this growth
which helped UK in increasing its Volumes. The biggest factor behind this growth was rise in
the volume of FX swap. Another reason was shifting to voice trading to electronic trading. The
average daily turnover of UK grew by 49 % during the time period of year 2016 and 2019. it
increase from $ 2.4 trillion to $ 3.6 trillion. At present, in global turnover, around 43 % is

contributed by UK only which was 37 % in year 2016. when looked at global level, US Dollar is
the most traded currency and UK has 44 % share of US dollar market.
Along with the swapping of currencies, there are other products of Foreign exchange
market that has seen growth. These are outright forwards. It is a kind of contract that helps the
countries or people in buying and selling of currencies. These accounted for around 15 % of the
all Foreign Exchange products traded by UK in 2019. This was 4% more in comparison to year
2016.
Give country level insights on AstraZeneca and its future.
AstraZeneca has contributed a lot to the country by providing its vaccine to the nation. It
denoted a vaccine of around $ 100 millions. It has an incredible project of pipeline that is used
by it for improving the life of people. It is collaborating with other entrepreneurs for proving
better medication facility to the people. It has been working in UK since 1999 and is serving the
country by introducing useful medicines that can help the nation in improving the health of its
citizens. It works with a strategy of delivering life changing vaccines and medicines so that they
can fuel the growth of the country by contributing in value of society and patients. Presently, the
vaccine provided by AstraZeneca is used as a vaccine for emergency. This has helped in it in
raising its value in market and hiking the prices of its shares (Zhong and et. al., 2019). It has
gained good position in the financial market of country. The future of company is very bright. It
can make use of resources available to it and by conducting research and development, the firm
can raise its market value and can also contribute more in the betterment of society. This can also
help it in increasing the value of its shares. The firm has certain ambitions which it is desiring to
attain till 2025. It is thinking to work towards future where all the people of country will be
having an access to healthcare solutions at sustainable level. It is thinking to demonstrate global
leadership so as to manage its environmental impact proactively. Also, it is trying to create a
positive societal impact on the ethical behaviour of market.
CONCLUSION
From the above analysis, it can be concluded that the value of firm depends on its capital
structure. It is important to have an optimum ratio in the structure of capital so that the value of
shareholders can be increased. It also impacts the share price of the firm and also impacts the risk
and return capacity of organisation. Even the news published in newspaper or online format

affects the reputation of company and the price of its shares. It holds the power to raise high and
bring down the value of stokes. Companies use to check out their performance by matching it
with the benchmark indexes and takes decision on the basis of this value only. Financial crises in
a country does not only impact that nation but holds the capacity to put its impact at global level.
The crises of year 2008 /09 has brought the situation of depression in almost whole world. The
employment level of country felled with great extent. In the same way, the emergence of Covid
has also impacted the nations a lot. Whole economy got affected very badly which would need
some time to get itself back in game. It has also affected the value of currencies a lot. So, on the
whole there is lot of impact of all the corporate functions at vast level in international scenario.

REFERENCES
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