Comparative Trend Analysis of Pharmaceutical Company:

GlaxoSmithKline and ACI Limited

Course Faculty : G. M Wali Ullah

Lecturer,
Independent University, Bangladesh

Course : FIN 201

(Section 2)

Submitted by:

Mehedi Al Zubran ID# 1410590

Intisar Obaid ID# 1410457

Shahrin Bhuiyan ID# 1430397

Refaiya Zaman ID# 1410265

Date of Submission: 12th July 2016 (Tuesday)

Independent University, Bangladesh

Block: B, Dhaka – 1229

Bangladesh
 Table of Contents:

Title Page Number

GSK at a glance 2
ACI at a glance 3
Profit Margin Ratio 4
Profit Margin Ratio Interpretations 5
Return on Assets Ratio 6
Return on Assets Ratio Interpretations 7
Return on Equity 8
Return on Equity Interpretations 9
Receivables Turnover 10
Receivables Turnover Interpretations 11
Average Collection Period 12
Average Collection Period Interpretations 13
Inventory Turnover 14
Inventory Turnover Interpretations 15
Fixed Asset Turnover 16
Fixed Asset Turnover Interpretations 17
Total Asset Turnover 18
Total Asset Turnover Interpretations 19
Current Ratio 20
Current Ratio Interpretations 21
Quick Ratio 22
Quick Ratio Interpretations 23
Debt to Total Assets Ratio 24
Debt to Total Asset Ratio Interpretations 25
Times Interest Earned Ratio 26
Times Interest Earned Ratio Interpretations 27
Fixed Charge Coverage Ratio 28
Fixed Charge Coverage Ratio Interpretations 29
Overall Trend and Comments 30

1
 GlaxoSmithKline (GSK) Bangladesh Ltd. at a glance.

Specializing on development of broad range of innovative medicines, vaccines, and consumer healthcare
products, British Pharmaceutical Company GlaxoSmithKline has reached the global market of 115
countries, with manufacturing facilities in 87 of them till date. Making them the sixth largest
pharmaceutical company in the world.

‘GlaxoSmithKline’ was formed as a result of a merger of ‘Glaxo Wellcome’ and ‘Smithkline Beecham’ in
the year 2000.
The beginning of this company in Bangladesh goes back to 1948, even before the independence of then
East Pakistan (now Bangladesh) under the label of ‘Glaxo Laboratories’.

After remaining only an importer from UK, Glaxo Laboratories launched their first manufacturing facility
in this region in 1967 in Chittagong. Which still plays an important role in their global manufacturing
excellence.

With the years of corporate evolution and mergers, the company finally changed its name to Glaxo
Wellcome Bangladesh in 1995, followed by the final merger with SmithKline Beecham and changing its
name to ‘GlaxoSmithKline Bangladesh Limited’ in 2002.

GSK Bangladesh Limited operates with a mission to improve the quality of human life, hoping to enable
them to achieve more, feel better and lengthen the lifespan of humans.
Transparency and integrity in patient focus in treatment is always valued here at GSK Bangladesh Ltd.
The company plants to achieve its goals by building a diversified Global company who will be able to
deliver products with more value, and operate with a simplified model by empowering individuals and
building trusts.
Organization behavior at GSK Bangladesh Ltd. includes: Flexibility in thinking, constant improvement,
consumer focus, Bring change and develop people and relationships.

Apart from being one of the leaders in the country’s pharmaceutical industry, GSK Bangladesh Ltd is
involved in social welfare and public service as per their missions to improve people’s lives.

Apart from being a funding body of the UK based youth award program “Duke of Edinburgh Awards” in
Bangladesh, GSK Bangladesh Ltd, has established Tuition free schools for slum children in Mirpur, Dhaka.
The company has firm regulations to maintain the safety of the environment.
Above information show the significant contribution GSK Bangladesh Ltd makes apart from being a
business entity.

GSK Bangladesh Ltd is dedicated to keep coming up with new and innovative healthcare solutions. The
values on which the company was built on have always inspired growth and will continue to do so in
times to come.

2
 ACI at a glance.
In 1973, the UK based multinational pharmaceutical organization, ICI plc, set up a backup in Dhaka,
known as ICI Bangladesh Manufacturers Limited. In 1992, ICI plc stripped its offer to nearby
administration, and the organization was renamed Advanced Chemical Industries (ACI) Limited. ACI
defines and showcases an extensive scope of more than 387 items covering all significant helpful zones,
which come in tablet, case, powder, fluid, cream, treatment, gel ,ophthalmic and infusion shapes. ACI
likewise showcases widely acclaimed marked pharmaceutical items like Arimidex, Casodex, Zoladex,
Atarax and so forth from world-class multinational organizations like ASTRAZENECA, UK and UCB,
BELGIUM in Bangladesh. In the wake of guaranteeing its qualifications in the pharmaceutical business of
the nation, ACI Limited started spreading its wings toward more prominent association, coordination
and relationship among individuals and association crosswise over outskirts with trust on turning into a
worldwide player in the universal business sector. ACI Limited began sending out solution in 1999. The
nature of ACI items, fortified by its ISO 9001 confirmation, has gotten quick achievement in Sri Lanka,
Myanmar, Vietnam and Yemen.

ACI Product ListACI consents to standard environment administration approach, in this manner
enhanced with EMS 14001 in 2000. ACI keeps up an amiable and steady association with the human
services group of Bangladesh, with the conviction that business greatness must be accomplished
through quest for quality by understanding, tolerating, meeting and surpassing client desires. The
administration of ACI, an able group of experts, in this way works with a dynamic mentality to give
powerful answers to fulfill the clients' needs, through its items and administrations of uncompromising
quality. ACI is effectively occupied with presenting more current particles and Novel Drug Delivery
Systems (NDDS) to address the issues without bounds. Its central goal is to advance the personal
satisfaction of individuals through mindful utilization of information, aptitudes and innovation. ACI is
focused on the quest for greatness through world-class items, creative procedures and engaged workers
to give the largest amount of fulfillment to its clients.

3
 Profitability Ratios:

1. Profit Margin
Profit Margin is found by dividing the Net Income by the Total sales and is shown in percentage.
The profit margin for both the companies are shown below:

PM= Net Income/Sales *Net Income and Sales are in BDT

GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Net Income 243967000 546249000 826778000 Net Income 545115873 764187906 950713609
Sales (Revenue) 5553812000 6774872000 7187225000 Sales (Revenue) 9680061562 10683600712 12318723190
Profit Margin 0.043927846 0.080628682 0.115034384 Profit Margin 0.056313265 0.071529059 0.077176311
Percentage 4.39 8.06 11.50 Percentage 5.63 7.15 7.72

In order to analyze the trend of the two company’s performance a graph is given below:

Profit Margin
12.00 11.50

11.00
Profit Margin (Percentage)

10.00
9.00
8.06
7.72
8.00
7.00
5.63 7.15
6.00
5.00 4.39

4.00
2012 2013 2014
Year
GlaxoSmithKline ACI

4
Interpretations:
2012:

GSK : The profit margin of 4.39% in 2012 proves that GSK makes a profit of TK 4.39
for every TK 100 sales.

ACI : The profit margin of 5.63% shows that for every TK 100 sales ACI makes a profit
of TK 5.63.

2013:

GSK : The profit margin of 8.06% in 2013 proves that GSK makes a profit of TK 8.06
for every TK 100 sales.

ACI : The profit margin of 7.15% shows that for every TK 100 sales ACI makes a profit
of TK 7.15.

2014:

GSK : The profit margin of 11.5% in 2013 proves that GSK makes a profit of TK 11.5
for every TK 100 sales.

ACI : The profit margin of 7.72% shows that for every TK 100 sales ACI makes a profit
of TK 7.72.

5
 2. Return on Assets

This is also formulated and represented as a percentage. Net Income divided by the Total
Assets give us the return on assets. The breakdown of the two companies return on assets for
the years are shown below:

2. Return on Assets
ROA= Net Income/Total Assets
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Net Income 243967000 546249000 826778000 Net Income 545115873 764187906 950713609
Total Assets 3064206000 3997625000 5028322000 Total Assets 13206467006 14557255461 15526192783
Return on Assets 0.079618342 0.136643382 0.164424235 Return on Assets 0.041276435 0.052495328 0.061232887
Percentage 7.96 13.66 16.44 Percentage 4.13 5.25 6.12

For analysis the graph is shown below:

Return on Assets
18.00 16.44
Return on Assets (Percentage)

16.00
13.66
14.00
12.00
10.00 7.96
8.00 6.12
5.25
6.00 4.13
4.00
2.00
2012 2013 2014
Year

GlaxoSmithKline ACI

6
Interpretations:
2012:

GSK : 7.96% return on asset proves that in this current year for every TK 100 worth of
assets, TK 7.96 profit is gained by GSK.

ACI : 4.13% return on asset proves here that ACI makes a profit of TK 4.13 for their
each TK 100 worth of Total Assets.

2013:

GSK : 13.66% return on asset proves that in this current year for every TK 100 worth
of assets, TK 13.66 profit is gained by GSK.

ACI : 5.25% return on asset proves here that ACI makes a profit of TK 5.25 for their
each TK 100 worth of Total Assets.

2014:

GSK : 16.44% return on asset proves that in this current year for every TK 100 worth
of assets, TK 16.44 profit is gained by GSK.

ACI : 6.12% return on asset proves here that ACI makes a profit of TK 6.12 for their
each TK 100 worth of Total Assets.

7
 3. Return on Equity

Return on equity is found by dividing the net income as usual with the shareholder’s equity.
Multiplied by 100 it is usually represented in a percentage. The company break-downs are given
below:

3. Return on Equity
ROE= Net Income/ Stockholder's Equity
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Net Income 243967000 546249000 826778000 Net Income 545115873 764187906 950713609
Stockholder's Equity 1485560000 1851112000 2316497000 Stockholder's Equity 5081286160 5637252251 6606685402
Return on Equity 0.164225612 0.295092355 0.356908729 Return on Equity 0.107279113 0.135560353 0.143901753
Percentage 16.42 29.51 35.69 Percentage 10.73 13.56 14.39

They are then represented as percentage. The graph looks somewhat like this:

Return on Equity
40.00 35.69
Return on Equity (Percentage)

35.00
29.51
30.00
25.00
20.00 16.42
13.56 14.39
15.00 10.73
10.00
5.00
2012 2013 2014
Year
GlaxoSmithKline ACI

8
Interpretations:
2012:

GSK : The return on equity of 16.42% represents that GSK turns a profit of TK 16.42 for every
TK 100 of shareholder’s equity.

ACI : The 10.73% of return on equity of ACI represents that ACI turns a profit of TK 10.73 for
every TK 100 of money that is given to them on equity by the shareholders.

2013:

GSK : The return on equity of 29.51% represents that GSK turns a profit of TK 29.51 for every
TK 100 of shareholder’s equity.

ACI : The 13.56% of return on equity of ACI represents that ACI turns a profit of TK 13.56 for
every TK 100 of money that is given to them on equity by the shareholders.

2014:

GSK : The return on equity of 35.69% represents that GSK turns a profit of TK 35.69 for every
TK 100 of shareholder’s equity.

ACI : The 14.39% of return on equity of ACI represents that ACI turns a profit of TK 14.39 for
every TK 100 of money that is given to them on equity by the shareholders.

9
 Asset Utilization Ratios:

4. Receivables Turnover

Receivables turnover is found by dividing the total sales on credit by the accounts receivables
which gives a result in ‘times’ indicating the amount, how much it (sales on credit) is compared
to the other variable (Accounts receivable).

Asset Utilization Ratios

4. Recievables Turnover
Rtover= Credit Sales/Accounts Recievables
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Sales (Credit) 5553812000 6774872000 7187225000 Sales (Credit) 9680061562 10683600712 12318723190
Accounts Receivable 487398000 506060000 1044908000 Accounts Receivable 1399774690 1722730712 5802572938
Recievables Turnover 11.39481902 13.38748765 6.878332829 Recievables Turnover 6.915442629 6.201550038 2.122976018
Times 11.39 13.39 6.88 Times 6.92 6.20 2.12

The graph is shown below:

Receivables Turnover Ratio

16.00
13.39
14.00
11.39
12.00
10.00
Times

8.00 6.92 6.88

6.20
6.00
4.00 2.12
2.00
0.00
2012 2013 2014
Year

GlaxoSmithKline ACI

10
Interpretations:
2012:

GSK : Made credit sales 11.39 times of the accounts receivable.

ACI : Made credit sales 6.92 times of the accounts receivable.

2013:

GSK : Made credit sales 13.39 times of the accounts receivable.

ACI : Made credit sales 6.20 times of the accounts receivable.

2014:

GSK : Made credit sales 6.88 times of the accounts receivable.

ACI : Made credit sales 2.12 times of the accounts receivable.

11
 5. Average Collection Period
The average collection period is calculated by account receivable divided by average daily credit
sales. The breakdown of the two companies’ average collection period for the years are shown
below:

5. Average Collection Period

ACP= Accounts Receivable/Avg. Daily Credit Sales
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Accounts Receivable 487398000 506060000 1044908000 Accounts Receivable 1399774690 1722730712 5802572938
Avg. Credit Sales 5553812000 6774872000 7187225000 Avg. Credit Sales 9680061562 10683600712 12318723190
Avg. Daily Credit Sales 15215923.29 18561293.15 19691027.4 Avg. Daily Credit Sales 26889059.89 29676668.64 34218675.53
Avg. Collection Period 32.03210155 27.26426418 53.06518441 Avg. Collection Period 52.05740533 58.05000327 169.5732768
Days 32.03 27.26 53.07 Days 52.06 58.05 169.57

For analysis the graph is shown below:

Average Collection Period

180
169.57
160
140
120
100
Days

80 52.06 58.05 53.07

60
40 27.26
20 32.03
0
2012 2013 2014
Year

GlaxoSmithKline ACI

12
Interpretations:
2012:

GSK : It took the company 52.06 days to receive payments owed, in terms of
receivables, from its customers and clients.

ACI : It took the company 32.03 days to receive payments owed, in terms of
receivables, from its customers and clients.

2013:

GSK : It took the company 58.05 days to receive payments owed, in terms of
receivables, from its customers and clients.

ACI : It took the company 27.26 days to receive payments owed, in terms of
receivables, from its customers and clients.

2014:

GSK : It took the company 169.57 days to receive payments owed, in terms of
receivables, from its customers and clients.

ACI : It took the company 53. 07 days to receive payments owed, in terms of
receivables, from its customers and clients.

13
 6. Inventory turnover
Inventory turnover is found by dividing the sales with the inventory of a company in a current
year. The years’ inventory turnover is given below:

6. Inventory Turnover
IT= Sales/Inventory
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Sales 5553812000 6774872000 7187225000 Sales 9680061562 10683600712 12318723190
Inventory 1059544000 1224492000 868079000 Inventory 2128984396 2553330342 2961175971
Inventory Turnover 5.241700203 5.532802174 8.279459588 Inventory Turnover 4.546797797 4.184182726 4.16007806
Times 5.24 5.53 8.28 Times 4.55 4.18 4.16

The analysis graph is shown below:

Inventory Turnover
9.00 8.28
8.00

7.00

6.00 5.53
5.24
5.00
Times

4.16
4.00 4.55
4.18
3.00

2.00

1.00

0.00
2012 2013 2014
Year

GlaxoSmithKline ACI

14
Interpretations:
2012:

GSK : Had sales 5.24 times more than their inventory value.

ACI : Had sales 4.55 times more than their inventory value.

2013:

GSK : Had sales 5.53 times more than their inventory value.

ACI : Had sales 4.18 times more than their inventory value.

2014:

GSK : Had sales 8.28 times more than their inventory value.

ACI : Had sales 4.16 times more than their inventory value.

15
 7. Fixed Asset Turnover
Fixed asset turnover is calculated by dividing the total sales simply by the total fixed assets,
measuring how much they have been able to make into sales, the result is left as ‘times’.

7. Fixed Assets Turnover

FAT= Sales/Fixed Assests
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Sales 5553812000 6774872000 7187225000 Sales 9680061562 10683600712 12318723190
Fixed Assets 497830000 586374000 578303000 Fixed Assets 4871795802 5232140478 5599031232
Fixed Assets Turnover 11.15604122 11.55384106 12.42813024 Fixed Assets Turnover 1.986959625 2.041917788 2.200152612
Times 11.16 11.55 12.43 Times 1.99 2.04 2.20

The Fixed asset turnover for GSK and ACI for the years 2012, 2013 and 2014 and their graphical
representations are given below.

Fixed Assets Turnover

14.00
12.43
11.55
12.00 11.16

10.00

8.00
Times

6.00

4.00
1.99 2.04 2.20
2.00

0.00
2012 2013 2014
Year

GlaxoSmithKline ACI

16
Interpretations:
2012:

GSK : Achieved sales value of 11.16 times more than their fixed assets.

ACI : Achieved sales value of 1.99 times more than their fixed assets.

2013:

GSK : Achieved sales value of 11.55 times more than their fixed assets.

ACI : Achieved sales value of 2.04 times more than their fixed assets.

2014:

GSK : Achieved sales value of 12.43 times more than their fixed assets.

ACI : Achieved sales value of 2.20 times more than their fixed assets.

17
 8. Total Asset Turnover

Total Asset Turnover ratio shows a company’s capability of turning their total asset worth to
sales. Found by dividing the sales with the total assets worth.

8. Total Assets Turnover

TAT=Sales/Total Assets
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Sales 5553812000 6774872000 7187225000 Sales 9680061562 10683600712 12318723190
Total Assets 3064206000 3997625000 5028322000 Total Assets 13206467006 14557255461 15526192783
Total Assets Turnover 1.81247997 1.694724243 1.429348598 Total Assets Turnover 0.732978893 0.733902125 0.793415576
Times 1.81 1.69 1.43 Times 0.73 0.73 0.79

The representative graph of the turnover looks somewhat like this:

Total Assets Turnover

2.00
1.81
1.80 1.69

1.60
1.43
1.40
Times

1.20

1.00
0.79
0.73 0.73
0.80

0.60
2012 2013 2014
Year

GlaxoSmithKline ACI

18
Interpretations:
2012:
GSK : In 2012, 1.81 times total assets turnover ratio means that GSK that the sales is
1.81 times that of the total assets it owns.
ACI : The 0.73 times ratio means that for each TK 1 of total assets it only generates
TK 0.73.

2013:
GSK : In 2012, 1.69 times total assets turnover ratio means that GSK that the sales is
1.69 times that of the total assets it owns.
ACI : The 0.73 times ratio means that for each TK 1 of total assets it only generates
TK 0.73.

2014:
GSK : In 2012, 1.43 times total assets turnover ratio means that GSK that the sales is
1.43 times that of the total assets it owns.
ACI : The 0.79 times ratio means that for each TK 1 of total assets it only generates
TK 0.79.

19
 Liquidity Ratios

9. Current Ratio
Current Ratio is found by dividing a company’s current asset with its current liabilities of a
current year. This is given below:

9. Current Ratio
CR=Current Assets/Current Liabilites
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Current Assets 2566376000 3411251000 4450019000 Current Assets 8334671204 9325114983 9927161551
Current Liabilities 1433857000 2020248000 2573107000 Current Liabilities 7101682744 7964837356 8358791057
Current Ratio 1.789840967 1.688530814 1.729434104 Current Ratio 1.173619198 1.170785361 1.18763126
Times 1.79 1.69 1.73 Times 1.17 1.17 1.19

The graph will make it clearer:

Current Ratio
2.00
1.79
1.80 1.69 1.73

1.60
Ratio

1.40
1.17 1.17 1.19
1.20

1.00
2012 2013 2014
Year

GlaxoSmithKline ACI

20
Interpretations:
2012:

GSK : 2012 current ratio of 1.79 means that GSK can pay its short-term debts TK 1.79
with its current assets for TK 1 of liabilities if needed be.

ACI : The 1.17 current ratio of ACI shows ACI has the capability of paying their short-
term liabilities with their current assets TK 1.17 for TK 1 of liability.

2012:

GSK : 2013 current ratio of 1.69 means that GSK can pay its short-term debts TK 1.69
with its current assets for TK 1 of liabilities if needed be.

ACI : The 1.17 current ratio of ACI shows ACI has the capability of paying their short-
term liabilities with their current assets TK 1.17 for TK 1 of liability.

2012:

GSK : 2014 current ratio of 1.73 means that GSK can pay its short-term debts TK 1.79
with its current assets for TK 1 of liabilities if needed be.

ACI : The 1.17 current ratio of ACI shows ACI has the capability of paying their short-
term liabilities with their current assets TK 1.19 for TK 1 of liability.

21
 10. Quick Ratio
Quick ratio is found by subtracting the inventory from current asset and dividing the result with
current liabilities.

10. Quick Ratio

QR= (Current Assets - Inventory)/Current Liabilities
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Current Assets 2566376000 3411251000 4450019000 Current Assets 8334671204 9325114983 9927161551
Inventory 1059544000 1224492000 868079000 Inventory 2128984396 2553330342 2961175971
Current Liabilities 1433857000 2020248000 2573107000 Current Liabilities 7101682744 7964837356 8358791057
Quick Ratio 1.05 1.082421069 1.392068033 Quick Ratio 0.873833292 0.850210034 0.833372378
Times 1.05 1.08 1.39 Times 0.87 0.85 0.83

The graph looks somewhat like this:

Quick Ratio
1.5 1.39

1.3
1.05 1.08
1.1
Ratio

0.87 0.85 0.83

0.9

0.7

0.5
2012 2013 2014
Year

GlaxoSmithKline ACI

22
Interpretations:
2012:

GSK : The quick ratio of 1.05 for GSK in 2012 suggests that it can quickly repay its
liabilities. For TK 1 of liability it can repay TK 1.05 without thinking about the
inventory.

ACI : ACI having a quick ratio of 0.87 means that for TK 1 of liability it can only repay
of about TK 0.87.

2013:

GSK : The quick ratio of 1.08 for GSK in 2012 suggests that it can quickly repay its
liabilities. For TK 1 of liability it can repay TK 1.08 without thinking about the
inventory.

ACI : ACI having a quick ratio of 0.85 means that for TK 1 of liability it can only repay
of about TK 0.85.

2014:

GSK : The quick ratio of 1.39 for GSK in 2012 suggests that it can quickly repay its
liabilities. For TK 1 of liability it can repay TK 1.39 without thinking about the
inventory.

ACI : ACI having a quick ratio of 0.83 means that for TK 1 of liability it can only repay
of about TK 0.83.

23
 Debt Utilization Ratios:

11. Debt to Total Asset Ratio

This ratio depicts the ratio of total debt to the total asset of a company. Usually represented as
a percentage, it looks somewhat like this.

11. Debt to Total Assets Ratio

DtoTA=Total Debt/ Total Assets
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Total Debt 1578646000 2146513000 2711825000 Total Debt 8125180846 8920003210 8919507381
Total Assets 3064206000 3997625000 5028322000 Total Assets 13206467006 14557255461 15526192783
Debt To Total Asset Ratio 0.515189253 0.536947062 0.539310132 Debt To Total Asset Ratio 0.615242581 0.612753086 0.574481298
Percentage 51.52 53.69 53.93 Percentage 61.52 61.28 57.45

The graph shows the trend:

Debt to Total Asset Ratio

64.00
61.52 61.28
62.00
Percentage

60.00
57.45
58.00
56.00 53.93
53.69
54.00
51.52
52.00
50.00
2012 2013 2014
Year

GlaxoSmithKline ACI

24
Interpretations:
2012:

GSK : The 51.5% debt to total asset ratio means that for every TK 100 of total asset,
TK 51.52 is earned through debt.

ACI : The 61.52% debt to total asset ratio shows that for every TK 100 of total asset,
debt is TK 61.52.

2013:

GSK : The 53.69% debt to total asset ratio means that for every TK 100 of total asset,
TK 53.69 is earned through debt.

ACI : The 61.28% debt to total asset ratio shows that for every TK 100 of total asset,
debt is TK 61.28.

2014:

GSK : The 53.93% debt to total asset ratio means that for every TK 100 of total asset,
TK 53.93 is earned through debt.

ACI : The 57.45% debt to total asset ratio shows that for every TK 100 of total asset,
debt is TK 57.45.

25
 12. Times Interest Earned

Times Interest Earned ratio shows how much the company earns with respect to the interest it
bears. The ratio is found by dividing the operating profit by the interest.

12. Times Interest Earned

GlaxoSmithKline ACI
TIE= Income before interets and taxes/ Interest
Year 2012 2013 2014 Year 2012 2013 2014
Income before Int & Tax 375670000 604604000 1062530000 Income before Int & Tax 920047782 1225882632 1785232330
Interests 60341000 123824000 122865000 Interests 115921159 100442211 94336465
Times Interest Earned 6.23 4.88 8.65 Times Interest Earned 7.94 12.20 18.92

The graph shows the pattern:

Times Interest Earned

18.92
20.00

15.00 12.20
Times

7.94 8.65
10.00
4.88
5.00 6.23

0.00
2012 2013 2014
Year

GlaxoSmithKline ACI

26
Interpretations:
2012:

GSK : The 6.23 times interest earned for GSK shows that in 2012 for TK 1 of interest it
earns a profit of TK 6.23.

ACI : 2012 shows a value of 7.94 times interest earned. This proves that ACI earned
7.94 times for each TK 1 of interest.

2013:

GSK : The 4.88 times interest earned for GSK shows that in 2012 for TK 1 of interest it
earns a profit of TK 4.88.

ACI : 2012 shows a value of 12.20 times interest earned. This proves that ACI earned
12.20 times for each TK 1 of interest.

2014:

GSK : The 8.65 times interest earned for GSK shows that in 2012 for TK 1 of interest it
earns a profit of TK 8.65.

ACI : 2012 shows a value of 18.92 times interest earned. This proves that ACI earned
18.92 times for each TK 1 of interest.

27
 13. Fixed Charge Coverage
Fixed charge coverage ratio depicts a company’s ability to meet the fixed charges of a company.
Income before fixed charges and tax is divided by the fixed charges to find the ratio which is
usually measured in times.

13. Fixed Charge Coverage Ratio

FCC= Income before fixed charges and taxes/ Fixed Charges
GlaxoSmithKline ACI
Year 2012 2013 2014 Year 2012 2013 2014
Income before FC & Tax 382562000 612339000 1073622000 Income before FC & Tax 920690893 1226417039 1785639933
Fixed Charges 67233000 138451000 133957000 Fixed Charges 116564270 100976618 94744068
FCC Times 5.69 4.42 8.01 FCC Times 7.90 12.15 18.85

Each of these ratios are found by dividing the Income before FC and TAX with the FC. Fixed
charges included the lease payments in the given year.

Fixed Charge Coverage Ratio

18.85
20.00

15.00 12.15
Times

10.00 8.01
7.90
4.42
5.00
5.69

0.00
2012 2013 2014
Year

GlaxoSmithKline ACI

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Interpretations:
2012:

GSK : The fixed charge coverage ratio of 5.69 shows that GSK has the ability to meet
its fixed charges 5.69 times.

ACI : 2012 FCC ratio of 7.90 shows ACI’s ability to meet its fixed charges is 7.90 times.

2013:

GSK : The fixed charge coverage ratio of 4.42 shows that GSK has the ability to meet
its fixed charges 4.42 times.

ACI : 2012 FCC ratio of 7.90 shows ACI’s ability to meet its fixed charges is 7.90 times.

2014:

GSK : The fixed charge coverage ratio of 8.01 shows that GSK has the ability to meet
its fixed charges 8.01 times.

ACI : 2012 FCC ratio of 18.85 shows ACI’s ability to meet its fixed charges is 18.85
times.

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Comment on ‘Overall Trend’ and Conclusion:
Both the companies are huge no doubt. Comparing all the ratios we see that in terms of “profit
margin”, GSK had a very high growth while ACI had a steady one. The “return on assets” and
the “return on equity” both were high for GSK and had been growing higher while ACI again has
had a steady growth. We observe a better profitability of GSK in terms of growth.

“Receivables Turnover” was higher for GSK and for both the companies they rose and fell in the
following year. “Average Collection Period” was interesting as both the companies had an
increasing number of days for a change in credit sales. GSK having a rise in “Inventory
Turnover” actually sees a gradual decline for ACI in the following years. Both the companies had
a rising “fixed assets turnover”, GSK having a very high ratio compared to that of ACI due to GSK
having less fixed assets. The “total assets turnover” however declined for GSK and rose a little
for ACI. The asset utilization ratios were such.

The liquidity ratio had been pretty steady. The “current ratio” for ACI was stable with GSK
having a slight change but the “quick ratio” shows ACI’s stability to an increase in GSK’s ratio.

The “debt to total asset” decreased for ACI while increased for GSK. The “times interest
earned” and “fixed charge coverage” has the same pattern of ACI in growth and GSK fluctuating
slightly.

Both the companies have differences in ratios due to differences in their products, sales,
system and methods. These two companies have a dominance in pharmaceuticals and the
figures complement them perfectly.

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