AstraZeneca Financial Reporting: Ratio Analysis and Performance Review

This report provides a comprehensive financial analysis of AstraZeneca, a major pharmaceutical company. It begins with an introduction to financial reporting and its significance for stakeholders. The main body of the report focuses on calculating various financial ratios, including profitability, liquidity, efficiency, and gearing ratios, using data from AstraZeneca's financial statements from 2018 and 2019. The report analyzes the company's financial performance based on these ratios, highlighting trends and comparing the two years. It also discusses the impact of poor financial strategies, resource deficiencies, communication problems, increased expenses, poor inventory management, and economic crises on the company's financial performance. The report provides recommendations for improving AstraZeneca's financial position, such as reducing expenses, recovering outstanding debts, selling unwanted assets, using key financial indicators, and applying financial governance. Finally, the report describes the application of IAS 12, Income Taxes, in the context of AstraZeneca, explaining the standard's provisions regarding deferred tax and its implications for financial reporting. The report concludes with a summary of the key findings and a list of references.

FINANCIAL REPORTING
FOR BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1 Calculation of financial ratio of AstraZeneca ..........................................................................1
2 Brief description of financial performance of AstraZeneca.....................................................4
3 Description of report of Deferred Tax regarding IAS 12 Income tax of AstraZeneca.........7
CONCLUSION................................................................................................................................8
REFRENCES...................................................................................................................................9

INTRODUCTION
Financial reporting is consider as document which show all the relevant information
regarding financial performance of an organization. Manager formulate, financial statement, cash
flow, fund flow document as by analysis financial ratio, could represent statement for
shareholder through which they can able to recognize whether organization is beneficial for them
or not. To understand this concept, AstraZeneca has been taken. Its headquarter is situated at
Cambridge, it is British Swedish organization which pharmaceutical business. This report
describe financial performance of organization by calculating relevant ratio. It also define
revenue of IAS 12 income tax standard and its provision in context with AstraZeneca
MAIN BODY
1 Calculation of financial ratio of AstraZeneca
Financial ratio: Theses are the technique of financial management used by managers
for understanding financial performance of an organization on the basis of calculating magnitude
of 2 select financial value of items taken from financial statements. There are various types of
ratio which divide in series according to their relevance. Following are the ratio analysis of
AstraZeneca
 Profitability ratio: Theses ratio are calculated for analysing ability of organization to
generate profit and use of these profits to fulfil liability of organization. Organization
use this ratio for measuring as well as compromising its revenue rate from current year to
past year. By profitably ratio , organization easily find out reason and well as difference
arise in revenue rate from any comparative year. It considers, revenue generate from
trading and business activities, and through investment in shares. following are profitably
ratio of AstraZeneca define below AstraZeneca (Pando, San-José, and Sicilia, 2019).
 Gross profit ratio
Particular 2018 2019
Gross profit 557.6 728.24
Sales 22,090.00 24384
Gross profit ratio = GP/ Sales 2.9 2.52
1

*100
 Net profit ratio
Particular 2018 2019
Net profit 2,050.00 1227
Sales 22090 24384
Net profit = NP/ Sales *100 7.47 4.53
 Return of equity
Particular 2018 2019
Net revenue 22090 24384
Shareholders equity 7,571.00 4705
ROE = Net revenue/
Shareholder's equity
10.43 15.71
 Return of assets
Particular 2018 2019
Net revenue 22090 24384
Total assets 60651 61377
ROA = Net revenue / Total
assets
5.62 9.69
 Liquidity ratio: Financial manager calculate theses ratio to understand position and level
of liquid assets an organization have. And these such liquid assets they have to fulfilled
current liabilities. Theses are essential ratio which useful in determining ability of
2

organization and this refers cash position of organization require for fulfilling basis need
and day to day business liabilities (Lang and Schmidt, 2016).
Current ratio
Particular 2018 2019
Current assets 14,609.00 15493
Current liabilities 16,292.00 18117
Current ratio = CA/CL 0.96 0.86
 Quick ratio
Particular 2018 2019
Quick assets 14609 – 4,630.00 = 9979 15493-4896 = 10597
Current liabilities 16292 18117
QR = Quick asserts / Current
Liabilities
0.63 0.61
 Efficiency ratio: Theses types of financial ratio has been used to measure efficiency of
an organization have to measure and control its assets and ability to pay its liability to
creditors. It includes, stock turnover, receivable turnover, creditor payable ratio. Theses
ratio indicate ability of organization have to pay their creditors debt amount, time
required for collecting cash from debtors and use of assets for generating revenue. These
ratio useful in identifying time required for conversion of raw material into stock and its
distribution process. As well as time organization need to collect payment from debtor
and ability to pay debt within short period of time. Manager use effective ratio for taking
decision and formate attractive business policies n(Forleo, Palmieri, Suardi, Coaloa, and
Pari, 2018).
Inventory turnover ratio
Particular 2018 2019
3

Cost of goods sold 22090 24384
Average inventory 4630 4896
Stock turnover = Cogs/
Average stock
5.05 9.42
Receivables turnover ratio
Particular 2018 2019
Net credit sale 22090 24384
Average account receivables 4,630.00 4896
Receivable turnover = Net
credit sales / Average
receivables
4.77 4.98
 Gearing ratio: It is calculate to analysis organization s financial leverage value. Gearing
ratio define degree manager use for funding organization's equity to its debt. This ratio
help in measuring and comparing equity value versus debt value of business corporations.
It includes, debt equity ratio as well as debt ratio., which useful in determiner value and
percentage through which manager can easily compare gearing difference between 2018
and 2019 (Held, Siebert, and Donath, 2020).
Debt to Equity ratio
Particular 2018 2019
Total liability 60,651.00 61377
Value of total shareholder's
equity
14044 14596
Debt / Equity 4.3 4.2
Debt ratio
Particular 2018 2019
Total debt 60651 61377
4

Total assets 45,060.00 45814
Debt ratio = Total debt / Total
assets
4.31 1.33
2 Brief description of financial performance of AstraZeneca
AstraZeneca is run business in pharmaceutical industry. It is one of the most famous
brand in medicine sector it is really hard to maintain position as this sector face high rate of
competition of local as well as global level companies. By calculating all the essential financial
ratio, it has been identified that this organization generate more profit in 2018 as can order to
2019 as the organization able to gear more profit . In 2018 value of gross profit ratio 2.9 and in
2019 value of gross profit had been reduce from 2.9 to 2.5.
Value of net profit ratio was 7.4 in 2018 and in 2019 the organization 's net profit decrease due to
4.1 .However ability of generate revenue from equity and assets is comparatively in 2019 was
much higher. But although it represent that management department of AstraZeneca not able to
generate high rate of money in 2019 as compare to previous year.
They use liquidity ratio to understand ability of organization for covering and using
liquid assets for fulfilling liabilities. AstraZeneca current ratio and value of quick ratio is
comparatively high then 2019 which means that liability of this organization for fulfilling their
debt liability a by using current ans liquid asset is high . They have sufficient liquid asset in
2018. This organization not use proper cash assets thus they not a to maintain position in market.
AstraZeneca effective ratio useful in recognize value and level or captivity of efficiency
organization have to fulfil their liabilities or generate revenue (Albu, Albu and Gray, 2020).
In 2018 value of stock turnover was 5.47 days an in 2019 it was 9.14 day this stated that
organization need more time in 2019 to sell their stock and value of their receivable turnover
days is comparatively less then 219 which also define that management department of
AstraZeneca need to take more days fro collecting funds from their debtor. It adversely prefect
position of the organization. Value of debt with equity is comparatively is also in better
condition then 2019, as the value of debt equity ratio were be 4.3 an and in 2019 it was
calculated 4.2.Just like these, debt assets value also at the same rate.
5

From analysing all the ratio it has been identified that position of AstraZeneca in market
as compare to 2018 was decrease. Organization not able to maintain its position and revenue
gernatet6in rate. Even they don't have enough time to control and handle efficiency level of the
organization. Thus it is relay hard to maintain effective efficacy and capability of payment to
creditors for the organization. Following are the reason financial performance of AstraZeneca
has been decreases
Poor financial strategy: Decrement in profits may be cause due to not using effective financial
strategies and plan which directivity impact managing assets and liabilities . It become the reason
of reduction in profit rates.
Resource deficiency: By not properly use financial resource and lack of expertise also main
case of decrement of financial performance of AstraZeneca . As due to Brixit agreement rate of
employee turnover goes high thus organization not able skilled personal for their work.
Poor communication problem: Organization not able to effective communicate with their
workforce , they don't able to understand clear goal thus workforce not able to work in effective
manner. They don't use effective marketing tools for communication.
Increment in expenses: To spread target market, AstraZeneca focus on research , it directly
increase cost of organization. Which also reasoning of reduce rate of profits.
Poor management if inventory: Management department of AstraZeneca not properly formate
polices and use tools for manage and control stock thus it will become reason on increasing
maintaining cost of inventory which directly impact on financial performance and increase value
of stock turnover ratio (Grishkina, Sidneva, Shcherbinina and Dubinina, 2018).
Effect of economic crises: After Brixit agreement , all the European countries change and made
strict or rigid polices regarding trade. Before this agreement, AstraZeneca easily get ingredient
require for produce drugs but now due to economic recession period, and high rate of ingredient,
the cost of producing drug is getting to high. Which may become the reason that organization
increase their price and this will adversely impact on reducing profit rates.
For enhancing financial position of AstraZeneca ,its management department needs to implement
following suggestion
Reduce expenses: Management department of AstraZeneca by cut throat activities which
generate high rate of cash outflow can able to increase their profits .
6

Recover outstanding debt collection: The main reason of reduction in financial performance of
the organization is that not pay timely their debt payment. Manager need to use effective strategy
to control their non performing asset and proved attract discount offer it will useful in motivate
customer so they pay cash rather then credit payment.
Selling of unwanted assets: AstraZeneca is multinational organization , in the situation of
financial crises, they can cover up cost and manage liquidity by selling unwanted asset and
securities. To increase cash inflow level within the organization .
Uses of key financial indicators: Management department of AstraZeneca need to apply key
performance indicator, benchmarking , theses technique useful in performance measurement .By
using marginal tools they can increase their sales market through motivate employee to cover up
target by offering them incentive.
Apply financial governance : AstraZeneca need to focus on applying this policy, as it will useful
in properly maintain records as well as work in ethical way. Manager for controlling misuse off
financial resources apply financial governance. This help in tracking all the records in effective
way.
3 Description of report of Deferred Tax regarding IAS 12 Income tax of AstraZeneca
IAS 12 , is related with provision regarding Deferred tax and its implementation during
preparing financial statement. During preparation of financial statement it is essential for
managers to focus on provision regarding tax and theses will be implies according to
International Financial Standard terms. IAS 12 standard is related with defiling method of
computation of current as well as deferred tax. It define as use of business assets and essential
liabilities which reflect corporate profit for same type of treatment.
This standard contain 8 section. Which define meaning, definition of deferred tax, how
organization able to calculate it , and requirement of IAS 12. It also define how manager allocate
liability of deferred tax, by adjustment in profit as well as loss, comprehensive income. They
disclose, deferred tax amount of current and future charges. In the their section related with
detail information regarding disclosure of unproved deferred tax, difference arises between asset
& liabilities. Recognition of deferred asset. IAS 12 by using norms of this standard AstraZeneca
could understand how asset and liabilities compensate with tax amounts. Settlement of tax and
how manager will be able to recover rates, They solve problem problem (Mullinova, and
Simonyants, 2016).
7

AstraZeneca suffers from issue arising due to complexities of deferred tax . Provision of
this tax help manager to avoid or eliminate intra group revenues. IAS 12 help in giving
information regarding how profit has been calculated and equity recognise profits. Provision of
shared payment . This standard define recovery of assets which is related with deferred payment
and is of these assets for analysing financial balance sheet.
IAS 12 's last sections define about summery if all the issues and method of solving all these
issue. It clearly mention that whether tax refine meets and fulfil criteria of deferred tax.
Reason of differences and variation arise between recognizing initial assets value. Base required
for changing theses standard .
Changes in accounting policies on the basis of revaluation in tax base system.
AstraZeneca use this standard norm which help in defining all the process and riles required for
calculation if income tax on the basis of include all the essential taxer. Manager of AstraZeneca
consider all the relevant tax liabilities during preparation of financial statements. It includes
foreign, domestic taxes, and also 2withohlding tax. Theses are playable by organization;s
subsidised. This standard define methods of accounting which is related with accounting grant.
AstraZeneca use this system as it will help in considering all the tax and manager can easily
define and evaluate difference and effective of each tax on calculating profit. AstraZeneca 's
management department can easily evaluate and recognize assets as well as liabilities which is
directly linked with de4ffred tax . It define systems sequences of payment of future tax
(Badenhorst, and Ferreira, 2016).
They calculate amount of deferred tax for success fulling competing all the more which
help in fulfilling responsibilities of financial governance. Managers for understanding effect of
all theses essential element of financial statement use this tax system. AstraZeneca cause
calculating of deferred tax can able to understand all the essential requirement, difference of
asset and liabilities and effect of each item due to effect of theses assets.
CONCLUSION
From the above analysis it has been concluded that every business organization needs,
financial reporting for identify and recognize financial position of their organization. On the
basis of that they formulate reports to represent theses report for their stockholders. By using
financial ratio, managers can easily recognize liquidity position of the organization and its
efficiency as well as ability of organization for fulfilling current and long term debt liabilities.
8

With the use of ratio s manage able to take decision regarding formation of effective financial
strategies through which they can able to attain business goals and generate high rate of profits.
For enhancing performance,managers need to apply and work according to IAS 12 standard
these help in work in ethical way and resolve issue arise regarding no payment of tax value .
REFRENCES
From books and journals
Pando, V., San-José, L. A. and Sicilia, J., 2019. Profitability ratio maximization in an inventory
model with stock-dependent demand rate and non-linear holding cost. Applied
Mathematical Modelling, 66. pp.643-661.
Lang, M. and Schmidt, P. G., 2016. The early warnings of banking crises: Interaction of broad
liquidity and demand deposits. Journal of International Money and Finance, 61, pp.1-
29.
Forleo, M. B., Palmieri, N., Suardi, A., Coaloa, D. and Pari, L., 2018. The eco-efficiency of
rapeseed and sunflower cultivation in Italy. Joining environmental and economic
assessment. Journal of Cleaner Production, 172, pp.3138-3153.
Held, S., Siebert, T. and Donath, L., 2020. Changes in mechanical power output in rowing by
varying stroke rate and gearing. European journal of sport science, 20(3), pp.357-365.
Albu, N., Albu, C. N. and Gray, S.J., 2020, February. Institutional factors and the impact of
international financial reporting standards: the Central and Eastern European
experience. In Accounting Forum (pp. 1-31). Routledge.
Grishkina, S., Sidneva, V., Shcherbinina, Y. and Dubinina, G., 2018, October. Comparability of
financial reporting under different tax regimes. In The 2018 International Conference
on Digital Science (pp. 88-93). Springer, Cham.
Mullinova, S. and Simonyants, N., 2016. Reflection of a deferred tax liability in the credit union
reporting according to IFRS (IAS) 12" Income taxes". Modern European Researches,
(1). pp.83-88.
Badenhorst, W. M. and Ferreira, P. H., 2016. The Financial Crisis and the Value‐relevance of
Recognised Deferred Tax Assets. Australian Accounting Review, 26(3). pp.291-300.
9