Comparison of Financial Position of Glaxo Smith Kline plc and Reckitt Benckiser Group plc

MANAGERIAL
FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Portfolio 1....................................................................................................................................3
Portfolio 2..................................................................................................................................14
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
The term managerial finance is form of finance that is also known as corporate finance.
This complies with the monetary decisions which are made in the companies in accordance of
commercial base (Huang, Shieh and Kao, 2016). It becomes essential for managers to take
suitable actions regards to management of finance so that all types of functions and activities can
be fulfilled. The project report is based on comparison of financial position of two companies
which are Glaxo Smith Kline plc and Reckitt Benckiser Group plc. Glaxo Smith Kline plc is a
British multinational pharmaceutical company whose headquarter is in Brentford, London. The
company was established in year 2000 (About Glaxo Smith Kline plc, 2019). While Reckitt
Benckiser Group plc is goods company which is located in Slough, England. It was founded in
year 1999 (About Reckitt Benckiser Group plc, 2019). The aim of project report is to suggest
investors about which company they should choose for investment. For this purpose vital range
of ratios are calculated and interpreted. In the next part of report, investment appraisal techniques
are applied in order to assess efficiency of given projects.
MAIN BODY
Portfolio 1.
(a) Calculation of ten financial ratio for two years. Current ratio = Current assets/ current liabilities
All data in £
million except
current ratio
Glaxo Smith Kline plc Reckitt Benckiser Group plc
2017 2018 2017 2018
Current assets 15907 16927 5424 4952
Current liabilities 26569 22491 6576 7614
Calculation 15907/26569 16927/22491 5424/6576 4952/7614
Current ratio 0.60 times 0.75 times 0.82 times 0.65 times
 Quick ratio = Quick assets / current liabilities
All data in £ Glaxo Smith Kline plc Reckitt Benckiser Group plc

million except
Quick ratio
2017 2018 2017 2018
Quick assets 10042 11121 4223 3676
Current liabilities 26569 22491 6576 7614
Calculation 10042/26569 11121/22491 4223/6576 3676/7614
Quick ratio 0.38times 0.49 times 0.64 times 0.48 times
 Net profit margin = Net profit / net sales x 100
All data in £
million except net
profit margin
Glaxo Smith Kline plc Reckitt Benckiser Group plc
2017 2018 2017 2018
Net profit 1532 3623 6172 2161
Net sales 30186 30821 11512 12597
Calculation 1532/30186*100 3623/30821*100 6172/11512*100 2161/12597*100
Net profit margin 5.07% 11.75% 53.61% 17.15%
 Gross profit margin = Gross profit / Net sales x 100
All data in £
million except
gross profit
margin
Glaxo Smith Kline plc Reckitt Benckiser Group plc
2017 2018 2017 2018
Gross profit 19844 20580 6870 7635
Net sales 30186 30821 11512 12597
Calculation 19844/30186*100 20580/30821*100 6870/11512*100 7635/12597*100
Gross profit
margin
65.74% 66.77% 59.68% 60.61%

 Gearing ratio = Total Debt / Equity
All data in £
million except
Gearing Ratio Glaxo Smith Kline plc Reckitt Benckiser Group plc
2017 2018 2017 2018
Total Debt 56449 53706 23480 22908
Equity -68 4360 13533 14742
Calculation 56449 / -68 53706 / 4360 23480 / 13533 22908 / 14742
Gearing Ratio -830.13 12.32 1.74 1.55
 Price earning ratio = Market value per share / earning per share
All data in £
million Glaxo Smith Kline plc Reckitt Benckiser Group plc
2017 2018 2017 2018
Market Price Per
Share 1361 1491.2 6841 5964
Earning Price Per
Share 0.3152 0.7455 8.3859 2.9361
Calculation 1361 / .3152 1491.2 / .7455 6841 / 8.3859 5964 / 2.9361
Price Earning Ratio 4317.89 2000.27 815.77 2031.26
 Earning per share = Net Profit / Ordinary Numbers of Shares
All data in £ Glaxo Smith Kline plc Reckitt Benckiser Group plc
2017 2018 2017 2018
Net Profit 1532 3623 6172 2161
Ordinary Numbers 4860 4860 736 736

of Shares
Calculation 1532/4860 3623/4860 6172/736 2161/736
EPS 0.3152 0.7455 8.3859 2.9361
 Return on capital employed = Operating profit (EBIT) / Capital employed *100
All data in £
million except
Return on capital
employed ratio
Glaxo Smith Kline plc Reckitt Benckiser Group plc
2017 2018 2017 2018
EBIT 6061 7064 2963 3280
Capital employed 29812 35575 30437 30036
Calculation 6061/29812*100 7064/35575*100 2963/30437*100 3280/30036*100
ROCE 20.33% 19.86% 9.73% 10.92%
Working Note:
Capital employed = Total assets – current liabilities
 Average inventory turn over period = Average stock / Cost of goods sold * 365 days
All data in £
million except
Average
inventory turn
over period
Glaxo Smith Kline plc Reckitt Benckiser Group plc
2017 2018 2017 2018
Average stock 5557 5476 1201 1276
Cost of goods
sold
10342 10241 4642 4962
Calculation 5557/10342*365 5476/10241*365 1201/4642*365 1276/4962*365
Average 196 days 195 days 94 days 93.86 or 94 days