LDT3106 - Examining Financial Statement Users: GSK Analysis

This report provides an analysis of the users of financial statements, focusing on GlaxoSmithKline (GSK) as a case study. It categorizes users into internal (employees and directors) and external (creditors and investors) groups, detailing how each group utilizes financial data to make informed decisions. For internal users, the report explains how employees assess their remuneration and directors evaluate strategic plans. For external users, it covers how creditors gauge the company's ability to repay debts and how investors determine investment opportunities. Furthermore, the report highlights the importance of financial data for debt management, governmental oversight, managerial decision-making, stakeholder analysis, and trend analysis, emphasizing the role of accurate financial records in enabling effective operational and financial decisions within GSK.

Introduction to
accounting LDT3106

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Describing users of financial statements and its importance to them ...............................1
CONCLUSION................................................................................................................................3
REFERENCES ...............................................................................................................................4

INTRODUCTION
Accounting refers to the process of recording transactions related to business. It includes
several activities such as organising, analysing and interpreting financial statements of an
enterprise (Baker, Andrew and Roberts, 2022). This assists in keeping track of the current
performance of an organisation. This report contains external users of Glaxo Smith Kline,
pharmaceuticals company. It is headquarter in London, England. There are numerous ways in
which financial data of company helps to its users which is also included in the report.
MAIN BODY
1. Describing users of financial statements and its importance to them
Financial statements refers to the accumulation of various records which helps to know
the ability of an organisation to generate revenue and profits during a specified period. There are
three main financial statements which are prepared to know the performance such as income
statement, cash flow statement and balance sheet. In this, it depicts the expenses, revenue, assets,
liabilities and flows of the business.
There are several users of financial data which can be categorised into two, namely
external users and internal users. Internal users are those who are working or operating within the
organisation whereas external users are those who take interest in the operations of an enterprise
for attracting funds required to carry out operations of business. The users of GlaxoSmith Kline
for its financial reports can be discussed as given below -
 Internal users:
a.) Employees – These are considered as assets of an organisation because all the
activities such as planning , organising and directing are incomplete without personnel.
Employees review the financial data of an accounting year to analyse whether the profits of an
enterprise are enough for their remuneration and other compensation benefits (Liu, 2020).
Financial data helps them to know their progress in terms of financial as well non financial. This
data helps to retain employee and increase job satisfaction through transparency in records. In
context of GlaxoSmith Kline, its employee gain confidence through financial statements and
helps in their retention in the organisation.
1

b.) Directors – Every organisation requires a top level authority to clearly dictate the
aims, objective and mission of a company (Maroun, 2018). Directors are those key persons
which are charged with framing the strategical plans required to implement for achieving
organisational goals. With respect to Glaxo Smith kline, its directors inspect the CFS, balance
sheet and income statement to ascertain the profitability and checking the deviation while
comparing current performance with its standards. It assists in alteration of strategical plans,
keeping in mind the strategies of its competitors.
External users:
a.) Creditors – These are persons who lend money to the organisation. Financial reports
helps the creditors to know about the paying capacity of the organisation. Creditors of Glaxo
SmithKline uses financial data to know whether the firm is capable to pay its due or not.
b.) Investors – Every business require capital to run its operations smoothly. Investors
plough funds which eases the organisation to conduct activities effectively. In context of Glaxo
Smith Kline, it has worldwide investors which rely on the financial health of an organisation to
invest its share in the respective company. Financial statements aids in taking decisions related to
investment.
 Importance of financial data to it users -
a.) Debt management – while inspecting financial statements, it helps to gain the knowledge
about its debts and its duration of repayment (Rebele and Pierre, 2019). Many ratios such as debt
to equity ratio and interest coverage ratio. In context of Glaxo Smith Kline , it uses net debt
divided by earnings before interest,tax,depreciation and amortization and another is EBIT.
Therefore, it takes into account both factors and its EBIT is decreased in previous year. It is
essential to carefully investigate the expenses related to interest and other debts because
accumulation of debts increases the liability of the business.
b.) Government – Financial statements of an enterprise helps the government to track financial
performance through which it can frame tax structure. GDP of an country consist income of
every sector. Therefore, for the estimation of economic growth it is crucial to study the
performance of each organisation. With respect of Glaxo Smith klien, its statement is helpful for
the government of UK.
C.) Management – Financial statement reveal the drawbacks and merits of the performance of
the organisation. Evaluating the financial records aids in knowing the difficulties of firm faced
2

during managing operations of an enterprise (Rico-Bonilla, 2020). Through it statements, it take
remedial measures to reframe the policies and procedures of Glaxo Smith klien.
d.) Stakeholders – They are the person who invest in the business or carrying some financial
interest in the organisation. Financial statement helps to know whether the stock is undervalued
or overvalued. It aids in identifying that the purpose for which stakeholders invest is fulfilling or
not. Whether the return are up to the mark for stakeholders or notes can be identified with the
help of records of finance.
e.) Analysis of trend – By studying financial statements, it can determine the ongoing trend
based on current and past performance. It helps the employees and key person to plan
accordingly for the future outcomes of the business.
CONCLUSION
Accounting records helps to keep track on every aspect of the organisation such as
expenses,revenue and income. Maintaining good relations with its stakeholders can also be
achieved by holding financial records of an enterprise. Putting accurate and valid records helps
to take various operational and financial decisions of an enterprise. Therefore, it can be
concluded that Glaxo Smith kline external users gain information of its financial health by
observing records of the same.
3

REFERENCES
Books and Journals
Baker, M., Andrew, J. and Roberts, J., 2022. Accounting talk: developing conversation analysis
in accounting research. Accounting, Auditing & Accountability Journal.
Liu, H., 2020, December. Research on Internal Control of Financial Accounting Information
System Based on ERP System. In 2020 Management Science Informatization and
Economic Innovation Development Conference (MSIEID) (pp. 347-350). IEEE.
Maroun, W., 2018. Modifying assurance practices to meet the needs of integrated reporting: The
case for “interpretive assurance”. Accounting, Auditing & Accountability Journal.
Rebele, J.E. and Pierre, E.K.S., 2019. A commentary on learning objectives for accounting
education programs: The importance of soft skills and technical knowledge. Journal of
Accounting Education. 48.pp.71-79.
Rico-Bonilla, C.O., 2020. Making women visible in the (accounting) history of
Colombia. Accounting History Review. 30(2).pp.207-232.
4