Objective of Financial Statements- a Critical Review
Astrazeneca: An overview
Astrazeneca is a leading pharmaceutical company formed in 1999 through merger of Astra AB of Sweden and Zeneca group PLC of UK (www.astrazeneca.com). The world pharmaceuticals market was valued at $492 billion in 2004 (Astrazeneca annual report, 2004). Moreover with Astrazeneca pumping in almost $3.8 billion into research and development for new drugs in 2004 at the rate of $15 million per working day makes it an interesting and an ideal entity to analyse (Astrazeneca annual report, 2004).
In addition to the above facts, Astrazeneca being a pioneer in its field will definitely be an ideal entity to study and analyze. Companies in the big league are expected to adhere to the highest level of standards while making their financial statements. However, to facilitate the process of evaluating Astrazeneca's financial statements, one must first comprehend as to what are the components that come together to form a financial statement.
The Major Financial statements At a Glimpse.
There are three major financial reports which are produced on a regular basis by the companies to try and give an overall picture of how the business is doing. These are a) the profit and loss account. b) The balance sheet c) The Cash Flow Statement (Atrill, 2002).Interpretation of each of this will give its reader understanding of a specific aspect of the business.
The profit and loss account is an indicator of the financial performance of the company, showing the increase or decrease in the company's wealth over the financial year. In the UK the statement of total recognised gains and losses also forms the part of the company's performance statements. While the profit and loss statements details the trading and operational activities, the statement of total recognised gains and losses shows the unrealised gains or losses affecting the overall wealth of the company(AC1101A lecture2,2005). For instance Astrazeneca's group profit and loss account for 2004 shows its total turnover at $21,426 million and its operating cost at $16,971 million while its Total recognised gains and losses for the year shows unrealised gains due to foreign exchange adjustments.
Similarly the balance sheet shows a snap shot' of the company at a particular moment in time in terms of its total wealth at the end of the financial year (Atrill, 2002). The balance sheet shows the financial position of the reporting entity. It reflects the commercial substance of an entity's activities in terms of the assets it controls and the liabilities it has incurred. In case of Astrazeneca the assets column in the balance sheet also includes Goodwill and intangible assets. These show the value of...
Please join StudyMode to read the full document