AAF0426: AstraZeneca Financial Reporting, Analysis & Performance

This report provides a comprehensive financial analysis of AstraZeneca, a biopharmaceutical company. It examines the importance of the statement of cash flow, statement of financial position, and income statement for external users, calculates profitability and investment ratios, and anticipates future business performance based on past and current positions. The report also discusses historical cost accounting, its advantages, and disadvantages. The analysis includes key metrics such as net profit margin, operating profit margin, return on capital employed, return on equity, and debt-to-equity ratio. The report compares AstraZeneca's performance with its competitor, GlaxoSmithKline, and concludes with a positive outlook for AstraZeneca's future based on its current and past achievements.

Financial reporting and
analysis AAF0426

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
(i) Background of the firm...........................................................................................................1
(ii) Critically discuss the Importance of statement of cash flow, statement of financial position
and income statement and how these aid the external users of the financial information...........2
(iii) Calculation of the profitability and the investment ratios of the company...........................4
(iv) Anticipation of the future performance of the business on the basis of its past and current
position........................................................................................................................................5
(v) Historical cost accounting, its advantages and disadvantages...............................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Budgetary collection and assessment are by far the most important and vital aspects for
every business that runs in the industry because they are connected to a monetary statement,
which seem to be pivotal for an organisation to function in an influential way in order to
maintain and thrive in an industry that really is strongly complex and innovative in essence
(Andarsari and Ningtyas, 2019). There are indeed a multitude of distinct facets which has been
involved in such budgetary management and analytics scenarios, so all of the facets are debated
and analysed in an effective way and that too in a really specific and accurate layout below so it
could even add long-term significance to the company. The following article is about Astra
Zeneca, a Conglomerate biopharmaceutical and laboratories firm based on the University
Biosciences Campus in Hertfordshire, United Kingdom. Therapies for tumour, heart disease,
gastrointestinal diseases, influenza, neurological, respiratory illnesses, and allergies are among
the company's pharmacological offerings. It was involved in the creation of the Oxford-
AstraZeneca COVID-19 vaccine. Swedish Astra AB and the British Zeneca Plc combined in
1999 to create the business. From its very merger, it has grown to be among the largest
healthcare organizations in the country, and it has made a number of acquisitions. Its research
and development is concentrated in three important locations: Hertfordshire, the British Isles;
Gothenburg, Sweden; and Montgomery, Maryland, the Americas. As a result, the review
examines all areas of the organisation, and it does so in great depth.
MAIN BODY
(i) Background of the firm
Astra AB was formed in 1974 in Sodertalje, Norway, by 350 surgeons and chemists.
Zeneca Business Ltd sprang triumphantly from the British commercial company ICI (which has
been founded through the merging of four British corporations) in 1993, with its
pharmaceuticals, chemical goods, and specialty businesses to create Zeneca Company Ltd. In
1999, Astra and Zeneca Corporation merged to form AstraZeneca plc, which is located in
Britain. In 1999, AstraZeneca decided to relocate its US offices to the "Fairfax-plus" location in
North-eastern Pittsburgh, Virginia. AstraZeneca is a company with a troubled history but, for the
immediate term, a promising future (Arifin, Kevin and Siswanto, 2017). We look at the
company's business, from its origins as a merger of two rivals to an even more recent major

restructuring and expenditures in cutting-edge chemotherapeutic and COVID-19. In 1998, the
commercial environment in the United Kingdom was witnessing a "purchase rush" - fierce
rivalry generated opportunities for companies to merge with competitors in an effort to simplify
combined companies. "Making a choice the next merger competitor is hard and also a task;
doing so when everyone else arrives, then determining the right time to quit presents a risky
investment situation," according to a November 1998 Television station News piece. Regardless
of the reality that it was labelled as a "dangerous practice," several businesses triumphed. On
February 6, 1999, two significant companies with similar science-based attitudes and a same aim
in the healthcare profession united to form AstraZeneca that is now considered as one of the
world's top ten biopharmaceutical companies. The merger of Iceland's Astra AB and the English
Zeneca controlling company is just one of the country's most significant deals right now.
(ii) Critically discuss the Importance of statement of cash flow, statement of financial position
and income statement and how these aid the external users of the financial information.
The following are the reasons why accounting information are important to multiple
stakeholders:
Exterior clients of finance accounts needs a lot of knowledge and accounting data supply
it. These would be the official statements that detail the fiscal performance of the business,
working capital, and operational achievements. Accounting records are divided into 3 sections:
A report of fiscal condition is a list of the corporation's resources and liabilities. Creditors,
taxation provisions, convertible notes, and other liabilities might be ongoing or non-current (Barr
and McClellan, 2018). Physical resources, cash equivalents, ventures, and so on are all examples
of resources. It assists exterior stakeholders in comprehending the firm's current economic health
and evaluating the firm's resources and obligations. It also indicates how firm resources, debts,
and total wealth have changed over time that aids in comparison research. It gives a structured
perspective of obligations, including medium and longer range indebtedness, which aids in
comprehending the obligations hierarchy of the firm as opposed to resources, and that shows the
cash flow budget its borrowing at the conclusion of the course, merging, consolidation, and other
events. It aids exterior stakeholders in determining a company's present long-term prosperity and
short-term prognosis by evaluating numerous fiscal measures like conversion rate, asset
turnover, asset leveraging proportion, loan ownership proportion, and so on. Exterior financial

statements consumers for AstraZeneca utilise the cash flow to seriously evaluate the company's
financial status and make necessary choices.
Income statements as they show the corporation's operational performance over the course
of a fiscal cycle. It's an important part of fiscal accounting since it shows if a company may make
money or lose money during the fiscal quarter. It takes into account all of a company's current
earnings and expenditures over the course of a season and displays the overall impact in terms of
statement of financial position. Exterior stakeholders can utilize it to identify hazards, fiscal
strength, operational capacity, and yield on capital in their businesses. Earnings include sales of
products, income, and income earned, among other things. Acquisitions of commodities, salaries
received, rental and security, publishing and stationery, and so forth are all examples of costs. It
aids interested parties in determining how effectively the company boosts the economy for its
shareholders in the shape of total and netted income. It examines the company's finances in
comparison to prior seasons (Block, Hirt and Danielsen, 2018). Exterior stakeholders might are
using it as a resource to anticipate the firm's growth and prosperity and to make financial.
Several essential numbers, like gross earnings and earnings per unit, are explicitly reported in
income reports, alleviating the need for investors to conduct additional investigation. The income
report for AstraZeneca provides information on the company's financial performance and how
much of those earnings is consumed up by various overhead expenses.
Cash flow reports indicate how much money comes in and goes out of a company over the
course of a year. Cash flows are subsequently divided into 3 classifications: working capital from
operational income, net money from funding activities, and money input from investment
activities. It assists prospective stakeholders in determining a company's current financial and
economic condition. These reports clearly show how well the company is meeting its spending
and responsibility obligations. When contrasted to revenue declarations, such declarations
frequently give superior critical economic metrics to multiple stakeholders since they represent
in which an organization's funds are invested across duration. It assists customers in determining
how much money a company needs and for what reason, including how much money is
converted into mechanical energy and how much is obtained from external suppliers. Clients of
AstraZeneca's financial circulation report gain clarity into the company's financial condition and
the allocation of capital into or out of the company.

(iii) Calculation of the profitability and the investment ratios of the company
Profitability Metrics: The profitability proportions of a firm examine the company's
capacity to generate revenue from its activities while meeting its expenditures. Various
profitability measures demonstrate the revenue of a company in various areas. It determines the
profitability by considering the company's revenues and expenditures (Chen, Tan and Fang,
2018). The return on assets determined and their explanation are listed below.
Net Profit Margin = Net Profit / Net Sales * 100
2019 = ( 1,227 / 23,565 ) * 100 = 5.20 %
2020 = ( 3,144 / 25,890 ) * 100 = 12.14 %
Operating Profit Margin = Operating Profit / Net sales * 100
2019 = ( 2,924 / 23,565 ) * 100 = 12.40 %
2020 = ( 5,162 / 25,890 ) * 100 = 19.93 %
Return on Capital Employed = Earnings Before Interest and Tax / ( Shareholder's equity +
Long term Liabilities )
2019 = 2,924 / ( 14,596 + 28,664 ) = 0.067
2020 = 5,162 / ( 15,638 + 30,784 ) = 0.111
Interpretation: Based on the aforementioned revenue proportion analysis, it could be
concluded that the company's efficiency during the past 2 years has improved. The firm's
operational income in 2019 was 12.4 percent, and this percentage improved to 19.9 percent the
following year, implying that the corporation was capable to generate 7.5 percent more revenue
on its activities. So although revenues have only risen by $2500, the company's gross income
percentage has risen significantly. This is attributable to a reduction in the company's non-
operational costs. The company's yield on investment used was 0.067 in 2019 and climbed to
0.111 in 2020, indicating that the company's profits have rose in proportion to the volume of
investment engaged. If AstraZeneca's productivity is contrasted to that of its major rival,
GlaxoSmithKline Healthcare Ltd, GSK's aggregate revenue percentage in 2019 was significantly
higher than AstraZeneca's, however it has suddenly decreased in 2020 and was reported at 2.89
percent. The foregoing analysis demonstrates that AstraZeneca's revenue is superior than those
of its primary competition (Dewi, Azam and Yusoff, 2019).
Investment Proportions: The investment percentages of a company indicate how much
money the company is making on its investments and how much money it is ready to revert to its

investors who've already put money into the company as equity. It also demonstrates how the
company manages its acquisition offers (Parvaneh and El-Sayegh, 2016).
Return on Equity = Net income / shareholder's equity
2019 = 1,227 / 14,596 = 0.084
2020 = 3,144 / 15,638 = 0.201
Debt to Equity ratio = Total Debts / Total Equity
2019 = 46781 / 14,596 = 3.20
2020 = 51091 / 15,638 = 3.26
Interpretation: The firm's earnings per share has grown to a certain amount in the 2 years
2019 and 2020, as shown by the preceding estimates. The earnings per share demonstrates how
well a company can utilize its resources to carry out its activities. The rate of interest on capital
is on the rise. The indebtedness to capital ratios of a company demonstrates how it manages its
finances and in what proportion it has them, taking into account the indebtedness and capital of
the company. The debt equities proportion of the company has remained consistent over the last
2 years, and when contrasted to the competition, GlaxoSmithKline, the earnings per share for
GSK has decreased over the last 2 years, and the current proportion is 5.11, this being
significantly below than AstraZeneca. This indicates that the company described in the study is
outperforming its biggest opponent (Eichelberger, Mattioli and Foxhoven, 2017).
(iv) Anticipation of the future performance of the business on the basis of its past and current
position
The development of AstraZeneca could be predicted by examining at the company's
present and previous accomplishments. AstraZeneca is a well-known pharmaceutical company in
the globe. The corporation's operation has indeed been practical and reliable in the marketplace,
and it is continuously searching for innovative approaches to introduce fresh inventions, and it
spends a lot of money on item exploration and improvement. The company's background could
be considered in a positive light because earnings have already been expanding with tremendous
increase, despite occasional highs and lows in income patterns. The covid-19 epidemic provided
AstraZeneca with numerous chances, as the company had made significant investments in the
design and manufacturing of a vaccination to combat the unexpected epidemic. AstraZeneca's
goal was to cooperate with several indigenous medication manufacturers in various regions to
bring unique vaccinations to market based on historical evidence and studies. The company

earned a decent amount from the selling of such multiple vaccinations, which were marketed
variously in multiple nations, and this set it apart from the rest of the global pharmaceutical
sector (Gajavelli, 2016). Given the continuous epidemic, it could be assumed that the company
will continue to do well in the sector for a prolonged length of duration if it continues to engage
in exploration and improvement of its merchandise. AstraZeneca's prospects are more clearer
than its rivals' because it is the only company where immunizations are created globally, and
several tests have found those medicines to be remarkably efficient. The firm's central emphasis
should be on its yield on investment spent. This yield, as per systems thinking, indicates how
much the company may make on its investment that is spent by the company's owners. They
must put all of this money into more lucrative areas of activities and ensure that no money is
squandered in the company.
(v) Historical cost accounting, its advantages and disadvantages
Traditionally, expenditure accounting assessed a product at the excess paid at the time of
acquisition for accounting information purposes. Historic expense accounting refers to the
practise of accountants reporting revenue, spending, reinvestment, and disposal on monetary
statements: that seems to be, the true amounts of money, or currency equivalents, acquired or
expended to complete a transaction. Underneath the chronologically priced principle, assets and
commitments are represented at their true ancient significance. The liabilities are computed by
deducting the market's monetary reports from every degradation and depreciation and
amortization when an asset is disposed off. Usually, the asset would also have been fully
amortised and thus no shortfall would also have been declared, but this isn't usually the case. If
the asset is sold, the rise or reduction is computed by subtracting the absorbing expense from the
selling value (Idris, Krishnan and Azmi, 2017). You're using the market's appraisal procedures in
both cases, but the firm didn't receive anything in return for the asset in the write-off. To record a
trade, the business must declare the amount of money received by customers, which would be, of
course, the market's current value - or, at the very least, its value to someone else.
Benefits-
 The implementation of this concept ensures that accounting information is unbiased. The
statistics in the bookkeeping records are really not polluted by artificial increases and
losses in value.

 Because business operations have often been documented on an unbiased basis, there
seems to be no opportunity for material to be tampered with (Kalkavan and Ersin, 2019).
 This pricing strategy also increases working capital reliability. The figures given are
undeniably correct. Simply go to the primary documents of the organizational operations,
such as invoices, official refunds, contracts, work orders, and so on, to verify the veracity
of the reported amounts in operating profit records.
Drawbacks-
 Asset values that are just not updated quickly become outdated. The amount of
amortisation is considerably excessively low. Lower expenditures lead to higher profits,
which could lead to unreasonably big payments. Making chronological comparisons is
tricky. Real figures, instead of various times in history, are often of importance to clients,
like loan security (Ljungqvist, Richardson and Wolfenzon, 2020).
 The financial accounts prepared using previous standard costing does not disclose any
substantial inflationary effects. As a consequence, a genuine and fair viewpoint is
lacking. Although devaluation might cause some items in financial systems to have a
higher value, this does not necessarily mean that the firm is expanding.
 So under historically pricing method, depreciation is imposed to the original value.
Because the cost of financial assets grows with volatility, depreciation is inadequate to
compensate for this. In a rapidly changing environment, historically expense accounting
does not accurately reflect current earnings and liabilities. More revenue will always be
recorded throughout volatility because to the excessive enthusiasm of closing stock
(Mishra, 2021).
CONCLUSION
As per the above it can be concluded that there are a number of factors which has a lot of
value in the industry and thus has to be analysed and evaluated in a detailed manner so that it can
add value to the firm in the long run. According to the previous section document, annual fiscal
statements and evaluation is a valuable instrument in managerial and accountancy concept
because it really could assist corporate administration in determining the company's effectiveness
and comparing it to something like its rivals. Distinct sectors have various set of standards
proportions that are determined by the company's functioning and procedures. The preceding
article is about the pharmaceutical company AstraZeneca that itself is based in the United

Kingdom. The paper explains how the company's various accounting information assist its
external consumers. The revenue and capital orientations of the company are then evaluated
using various metrics. Those proportions are contrasted to the proportions of GlaxoSmithKline, a
major rival of the firm that is mentioned in the above report in detail. A thorough study of the
company's operational plans is offered, stating how AstraZeneca would continue to generate
significant earnings if it continues to commit significant amounts in the study and marketing of
its goods and medications. The final section of the research discusses how historically price
management is both advantageous and detrimental to firms. AstraZeneca's performance is
generally seen as superior to that of its closest rivals.

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