Financial Analysis of Gsk
Financial Analysis of GlaxoSmithKline
Liquidity Ratio
1. Current ratio Year | 2007 | 2008 | 2009 | 2010 | 2011 | Current Ratio: | 4.64 times | 2.96 times | 3.11 times | 2.59 times | 2.05 times |
Interpretation:
In 2011, the company’s current assets were 2.05 times the current liabilities. The current ratio has been decreasing significantly over the years and this clearly indicates that the current ratio is not in a good shape. In 2011, although the current assets have increased but the relative change in the current liability has been greater than the relative change in the current asset in comparison to 2010 thus minimizing the current ratio.
2. Quick Ratio:
Year | 2007 | 2008 | 2009 | 2010 | 2011 | Quick Ratio: | 1.94 times | 1.23 times | 1.69 times | 1.60 times | 0.95 times |
Interpretation:
In 2011, the company’s current asset excluding inventory was 0.95 times of the current liability. The graphical representation shows that the quick ratio has been fluctuating and has not been stable. Therefore the company is worse off than the previous year. The current asset excluding the inventory went down and an increase in the current liability has reduced the quick ratio of 2011 to 0.95.
Debt Management Ratio: 1. Debt Ratio:
Year | 2007 | 2008 | 2009 | 2010 | 2011 | Debt Ratio | 14.8% | 25.3% | 25.2% | 31.8% | 39.8% |
Interpretation:
In 2011, the company’s 39.8% of total assets were financed by debt. The debt ratio has increased with time which is not preferable. This can hinder the company’s performance in the future. An increase in the total debt has caused the debt ratio to shoot up. 2. Times Interest Earned Ratio:
Year | 2007 | 2008 | 2009 | 2010 | 2011 | (TIE) ratio | 16.8 times | 24.3 times | 528.1times | 674.1times | 123.8 times |
Interpretation:
In 2011 the company has covered its interest expense 123.8 times. It has declined than last year and the company is not in a good position. The ratio has
Liquidity Ratio
1. Current ratio Year | 2007 | 2008 | 2009 | 2010 | 2011 | Current Ratio: | 4.64 times | 2.96 times | 3.11 times | 2.59 times | 2.05 times |
Interpretation:
In 2011, the company’s current assets were 2.05 times the current liabilities. The current ratio has been decreasing significantly over the years and this clearly indicates that the current ratio is not in a good shape. In 2011, although the current assets have increased but the relative change in the current liability has been greater than the relative change in the current asset in comparison to 2010 thus minimizing the current ratio.
2. Quick Ratio:
Year | 2007 | 2008 | 2009 | 2010 | 2011 | Quick Ratio: | 1.94 times | 1.23 times | 1.69 times | 1.60 times | 0.95 times |
Interpretation:
In 2011, the company’s current asset excluding inventory was 0.95 times of the current liability. The graphical representation shows that the quick ratio has been fluctuating and has not been stable. Therefore the company is worse off than the previous year. The current asset excluding the inventory went down and an increase in the current liability has reduced the quick ratio of 2011 to 0.95.
Debt Management Ratio: 1. Debt Ratio:
Year | 2007 | 2008 | 2009 | 2010 | 2011 | Debt Ratio | 14.8% | 25.3% | 25.2% | 31.8% | 39.8% |
Interpretation:
In 2011, the company’s 39.8% of total assets were financed by debt. The debt ratio has increased with time which is not preferable. This can hinder the company’s performance in the future. An increase in the total debt has caused the debt ratio to shoot up. 2. Times Interest Earned Ratio:
Year | 2007 | 2008 | 2009 | 2010 | 2011 | (TIE) ratio | 16.8 times | 24.3 times | 528.1times | 674.1times | 123.8 times |
Interpretation:
In 2011 the company has covered its interest expense 123.8 times. It has declined than last year and the company is not in a good position. The ratio has