GlaxoSmithKline's ratios show deteriorating liquidity and increasing debt levels from 2009-2011. Current, quick, and cash ratios all declined, as did interest coverage. Debt ratios like debt-to-equity and debt-to-capital rose sharply. Profitability ratios declined in 2010 but recovered in 2011, with net profit margin, return on equity, and return on assets all improving. Inventory and receivables management was mixed, while payables turnover declined steadily.

1. RATIOS ANALYSIS
Of
GlaxoSmithKline (Pak) Ltd
Submitted to:
Miss: - Malika Romeo
Prepared By:
Muhammad Mubeen Raza
mubeen_raza110@hotmail.com
PROGRAM: BBA
SUBJECT : Financial Management

2. GSK Term Report
1
Company’s Profile
Glaxo Smith kline (Pak) Ltd
GlaxoSmithKline Pakistan Limited was created on January 1st 2002 through the
merger of SmithKline and French of Pakistan Limited, Beecham Pakistan (Private)
Limited and Glaxo Wellcome (Pakistan) Limited- standing today as the largest
pharmaceutical company in Pakistan
As a leading international pharmaceutical company we make a real difference to global
healthcare and specifically to the developing world. We believe this is both an ethical
imperative and key to business success. Companies that respond sensitively and with
commitment by changing their business practices to address such challenges will be the
leaders of the future. GSK Pakistan operates mainly in two industry segments:
Pharmaceuticals (prescription drugs and vaccines) and consumer healthcare (over-the-
counter- medicines, oral care and nutritional care).
GSK leads the industry in value, volume and prescription market shares. We are proud
of our consistency and stability in sales, profits and growth. Some of our key brands
include Augmentin, Panadol, Seretide, Betnovate, Zantac and Carpol in medicine and
renowned consumer healthcare brands include Horlicks, Aquafresh, Macleans and
ENO. Web: www.gsk.com.pk
Mission Statement
Excited by the constant search for innovation, we at GSK undertake our quest with the
enthusiasm of entrepreneurs. We value performance achieved with integrity. We will
attain success as a world-class global leader with each and every one of our people
contributing with passion and an unmatched sense of urgency.
Our mission is to improve the quality of human life by enabling people to do more, feel
better and live longer.
Quality is at the heart of everything we do- from the discovery of a molecule to the
development of a medicine.

3. GSK Term Report
2
Glaxo Smith Kline Plc (Gsk) Ratio Analysis
Liquidity Ratios
Liquidity ratios measure the company's ability to meet its short-term obligations.
Dec 31,
2009
Dec 31,
2010
Dec 31,
2011
Industry Average
2011
Ratio Analysis
Current ratio 1.45 1.25 1.08 1.59
GSK’ current ratio
deteriorated from
2009 to 2010 and
from 2010 to 2011.
Quick ratio 1.07 0.92 0.74 1.15
GSK’ quick ratio
deteriorated from
2009 to 2010 and
from 2010 to 2011.
Cash ratio 0.56 0.49 0.39 0.69
GSK’ cash ratio
deteriorated from
2009 to 2010 and
from 2010 to 2011.
Current Ratio= Current Asset / Current Liability
This shows that in 2009, 10, 11 the company has Rs 1.45, 1.25, 1.08 to pay off the liability of Rs
1 while the industry average is at 1.59 which is definitely not a good sign for the industry as well
because the industry might be at trouble and has taken more debts, but comparatively industry
is at a good position. Whereas the variation can be clearly seems in the company’s ratios from
proceeding years that is just enough to pay off its liability of Rs 1 but this gives not a good
picture because the ratio has significantly increased in 2011 but the industry is still leading. The
company should reduce its debt and raise its current assets to have a improved current ratio.
Quick Ratio= Current Asset-Inventory / Current Liability
This shows that in 2009, 10, 11 GSK has quick ratio of 1.07, 0.92, 0.74 and industry average is
1.15 which means that both the industry and gsk is having more cash and less inventory. In past
three years the ratios of gsk is showing significant declined and it shows that gsk is declining its
cash. In 2011 the industry is comparatively at a good position than the company because the
company might have more inventories and less cash or the higher liabilities. The company
should either decrease its liability or increase the amount of cash or reduce the inventories.

4. GSK Term Report
3
Cash ratio = Total cash assets / Current liabilities
A cash ratio of gsk in 2009, 10, 11 respectively 0.56, 0.49, and 0.39 is decreasing frequently
and also lesser than the industry average i.e. 0.69. The decreasing Cash Ratio is generally a
negative sign for gsk, showing the company is less able to cover its obligations to creditors.
Debt and Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company's ability
to meet long-term obligations.
Debt to equity = Total debt / Shareholders’ equity
The debt to equity ratios of the gsk in preceding years is frequently increasing and in the
current year 2011 it is 1.86 that shows that the company taking more and more debts
while the industry average is far better that is 0.42. An increasing Debt to Equity Ratio
usually indicates the general operations of the company may become more risky.
2011,
= 23,153 / 12,480 (USD $ in millions)
= 1.86
Debt to capital = Total debt ÷ Total capital
2011,
Dec 31,
2009
Dec 31,
2010
Dec 31,
2011
Industry
Average
2011
Ratio Analysis
Debt to equity 1.62 1.70 1.86 0.42
GlaxoSmithKline PLC's debt-to-equity
ratio deteriorated from 2009 to 2010 and
from 2010 to 2011.
Debt to capital 0.62 0.63 0.65 0.30
GlaxoSmithKline PLC's debt-to-capital
ratio deteriorated from 2009 to 2010 and
from 2010 to 2011.
Interest coverage 11.25 5.12 11.35 15.45
GlaxoSmithKline PLC's interest
coverage ratio deteriorated from 2009 to
2010 but then improved from 2010 to
2011 exceeding 2009 level.

5. GSK Term Report
4
= 23,153 / 35,632 (USD $ in millions)
= 0.65
Interest coverage = EBIT / Interest expense
The gsk interest coverage ratio decreased in 2010 from 11.25 to 5.12, decreasing
Interest Coverage Ratio is usually a negative sign, showing the company is less able to
pay its Interest Expense with its earnings. But in year 2011 it increases again to 11.35
and this increasing Interest Coverage Ratio is usually a positive sign, showing the
company is more able to pay its Interest Expense with its earnings. Moreover, industry
average is at 15.45 that is far better than gsk.
2011,
= 13,117 / 1,156 (USD $ in millions)
= 11.35
Short-Term (Operating) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day
tasks, such us the collection of receivables and management of inventory.
DEC
31,
2009
DEC
31,
2010
DEC
31,
2011
Industry
Average
2011
Ratio Analysis
Inventory
turnover
6.98 7.40 7.07 10.67
GlaxoSmithKline PLC's inventory turnover
improved from 2009 to 2010 but then slightly
deteriorated from 2010 to 2011 not reaching
2009 level.
Receivables
turnover
5.17 6.01 6.17 6.47
GlaxoSmithKline PLC's receivables turnover
improved from 2009 to 2010 and from 2010
to 2011.
Payables
turnover
15.29 13.26 10.66 13.18
GlaxoSmithKline PLC's payables turnover
declined from 2009 to 2010 and from 2010 to
2011.
Working
capital
turnover
3.69 4.42 4.77 5.80
GlaxoSmithKline PLC's working capital
turnover improved from 2009 to 2010 and
from 2010 to 2011.

6. GSK Term Report
5
Inventory turnover = Turnover / Inventories
The gsk inventory turnover ratio in 2010 showing an increasing Inventory Turnover 6.98
to 7.40 that indicates gsk is more efficiently able to convert its inventory into sales. But it
fall down in 2011 to 7.07 that a decreasing Inventory Turnover indicates gsk is less
efficiently able to convert its inventory into sales. Moreover, industry average showed a
good picture that is at 10.67 respectively.
2011,
= 42,553 / 6,018 (USD $ in millions)
= 7.07
Receivables turnover = Turnover / Trade receivables
The gsk accolunt receivable ratios are decreasing frequently that decreasing Accounts
Receivable Turnover showed gsk is not successfully executing its credit policies and is slower to
turn its Accounts Receivables into cash.
2011,
= 42,553 / 6,900 (USD $ in millions)
= 6.17
Payables turnover = Turnover / Trade payables
2011,
= 42,553 / 3,990 (USD $ in millions)
= 10.66
Working capital turnover = Turnover / Working capital
The gsk working capital turnover ratios are increasing frequently in the preceding years that are
3.69, 4.42 and 4.77 respectively; the increasing Working Capital Turnover is a positive sign,
showing gsk is more able to generate sales from its Working Capital. But it’s not good overall
because industry average is at 5.80 that showed a good picture and still far better than gsk.
2011,
= 42,553 / 8,928 (USD $ in millions)
= 4.77
Receivable collection period = 365 / Receivables turnover
receivable
collection
period
71 61 59 56
GlaxoSmithKline PLC's average receivable
collection period improved from 2009 to 2010
and from 2010 to 2011.

7. GSK Term Report
6
2011,
= 365 / 6.17 (no. of days)
= 59
Long-Term (Investment) Activity Ratios:
Activity ratios measure how efficiently a company performs day-to-day tasks, such us
the collection of receivables and management of inventory.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Net fixed asset
turnover Total asset
turnover Equity
turnover
31-Dec-09
31-Dec-10
31-Dec-11
Industry Average 2011
Short-Term (Operating) Activity Ratios

8. GSK Term Report
7
Dec 31,
2009
Dec 31,
2010
Dec 31,
2011
Industry
Average
2011
Ratio Analysis
3.13 4.44
Net fixed asset
turnover
3.03 3.14
GlaxoSmithKline PLC's net fixed asset
turnover improved from 2009 to 2010
but then slightly deteriorated from 2010
to 2011.
Total asset
turnover
0.66 0.67 0.67 0.57
GlaxoSmithKline PLC's total asset
turnover improved from 2009 to 2010
but then slightly deteriorated from 2010
to 2011 not reaching 2009 level.
Equity
turnover
2.84 3.19 3.41 1.22
GlaxoSmithKline PLC's equity turnover
improved from 2009 to 2010 and from
2010 to 2011.
Net fixed asset turnover = Turnover / (fixed asset – depreciation)
The gsk net fixed asset ratio increased from 3.03 to 3.14 in 2010 from 2009 but in 2011
it slightly decreased to 3.13. An increasing Fixed Asset Turnover means gsk has been
more effective using company's investments in Net Property, Plant, and Equipment and
decreasing Fixed Asset Turnover means that gsk has been less effective using
company's investments in Net Property, Plant, and Equipment. Moreover, the industry
average showed a good picture that is at 4.44 respectively.
2011,
= 42,553 / 13,592 (USD $ in millions)
= 3.13
Total asset turnover = Turnover / Total assets
The gsk total assets turnover ratios in the preceding years are almost unchanged it showed that an
unchanged Total Asset Turnover indicates the gsk’s effectiveness in the using the investments
made in the company (Total Assets) has remained the same.
2011,
= 42,553 / 63,828 (USD $ in millions)
= 0.67
Equity turnover = Turnover ÷ Shareholders’ equity

9. GSK Term Report
8
2011,
= 42,553 / 12,480 (USD $ in millions)
= 3.41
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
31-Dec-09 31-Dec-10 31-Dec-11 Industry Average
2011
Net fixed asset turnover
Total asset turnover
Equity turnover
Long-Term (Investment) Activity Ratios

10. GSK Term Report
9
Profitability Analysis
Profitability ratios measure the company's ability to generate profitable sales
from its resources (assets).
Net Profit Margin = Net Income/Sales
The GSK Net Profit Margin decreased from 19.98 to 6.52 in 2010 that shows the net
profit out of each dollar of sales has become smaller. But in 2011 it increased again to
31-Dec-
2009
31-Dec-
2010
31-Dec-
2011
Industry
Average
2011
Ratio Analysis
Gross
profit
margin
73.98% 73.26% 73.22%
GlaxoSmithKline PLC's gross profit
margin deteriorated from 2009 to
2010 and slightly from 2010 to 2011.
Operating
profit
margin
29.69% 13.32% 28.50% 20.11%
GlaxoSmithKline PLC's operating
profit margin deteriorated from 2009
to 2010 but then improved from 2010
to 2011 not reaching 2009 level.
Net profit
margin
19.98% 6.52% 19.90% 14.83%
GlaxoSmithKline PLC's net profit
margin deteriorated from 2009 to
2010 but then improved from 2010 to
2011 not reaching 2009 level.
Return on
equity
(ROE)
52.74% 19.01% 61.83% 18.11%
GlaxoSmithKline PLC's ROE
deteriorated from 2009 to 2010 but
then improved from 2010 to 2011
exceeding 2009 level.
Return on
assets
(ROA)
13.2% 4.38% 10.28% 8.46%
GlaxoSmithKline PLC's ROA
deteriorated from 2009 to 2010 but
then improved from 2010 to 2011 not
reaching 2009 level.

11. GSK Term Report
10
19.90 that show the net profit out of each dollar of sales has become larger while
industry average is not showing a good picture that is at 14.83.
2011,
=5458/27387 (USD $ in millions)
=0.1990 => 19.90%
Return on Common Equity = Net Income/Common Equity
2011,
=5458/8827 (USD $ in millions)
=0.6183 => 61.83%
Return on Assets = Net Income/Total Assets
The gsk return on assets ratio decreased greatly in 2010 to 4.38 from 13.20 that
decreasing Return on Total Assets (ROI) shows gsk has been less able to use the
investments in the company (the Total Assets) to generated income (Net Earnings)
back to the company. But it improved in 2011 to 10.28 this increasing Return on Total
Assets (ROI) shows that gsk has been more able to use the investments in the
company (the Total Assets) to generated income (Net Earnings) back to the company.
While industry average is not showing a good picture that is at 8.46 and gsk is at better
place as compare to industry.
2011,
=5458/41080 (USD $ in millions)
=0.1028 => 10.28%
Gross profit margin = gross profit / sales
The gsk gross profit margin is decreasing slightly from the preceding years and it considered as
unchanged that shows the ablility of the gsk to control its costs while generating sales has
remained the same.
2011,
= 20,055 / 27,387 (USD $ in millions)
=73.22%
Operating profit margin = Operating profit / sales
The GSK decreasing Operating Profit Margin from 2009 to 2010 that is 29.69 to 13.62
that indicates gsk has been less efficient in its day-to-day operations. But it increased in
2011 to 28.50 this increasing Operating Profit Margin indicates the gsk has been more

12. GSK Term Report
11
efficient in its day-to-day operations. Moreover, the gsk is showing a good picture that it
is better than the industry average is at 20.11 respectively.
2011
= 7,807 / 27,387 (USD $ in millions)
=28.50%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Gross profit
margin
Operating
profit margin
Net profit
margin
Return on
equity (ROE)
Return on
assets (ROA)
31-Dec-09
31-Dec-10
31-Dec-11
Industry Average 2011