Analyze the riskiness of the firm

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1.       Fill in the income statement for GlaxoSmithKline (UK)and Balance sheet in Appendex A for 2011 and 2010.  Take the numbers from their corporate website ONLY and then take the rate of USD and convert the numbers from Pounds to USD.

(Individual) One challenge of comparing firms, even within the same industry, is that the firms use different formats and classifications in preparing their financial statements. One way to address this situation is to convert the financial statements of firms into a standard format before undertaking financial analysis.

For each firm, convert the Income Statement and Balance Sheet of the firm into the standard format shown in Appendix A.  Clearly indicate how you mapped the items from the financial statements to the standard format. Also, indicate the items in the Income Statement you tagged as non-recurring (with reasons for doing so) and hence did not include in the standard format

2.       (Individual) For each firm, using the model developed in Module 4 of the text, disaggregate ROE into its operating and nonoperating components. Discuss the impact financial leverage has on firm's ROE. Further, disaggregate RNOA into its components and analyze each of the components further to gain insights into the factors driving firm's performance.

Using appropriate ratios, analyze the riskiness (short-term liquidity and long-term solvency) of the firm

Appendix A

Template for Income Statement

 

Income Statement

Current fiscal Year

Past fiscal year

Sales (Net)

 

 

Cost of Goods Sold

 

 

 Gross Profit

 

 

R&D Expense

 

 

SG&A Expense

 

 

Other Operating Expenses (Net)

 

 

EBIT (=Operating Income)

 

 

Non-Operating Income (Loss)

 

 

EBT

 

 

Income Taxes

 

 

Net Income before Ext. items

 

 

Preferred Dividends

 

 

Net Income (available to common)

 

 

Note: If your firm has Minority Interest in Earnings, ignore it in the calculation of Net IncomeTemplate for Balance Sheet

 

Balance Sheet

Current fiscal year

Prior fiscal year

Operating Cash

 

 

Short-term Investments

 

 

Receivables

 

 

Inventories

 

 

Other Current Assets

 

 

Total Current Assets

 

 

PP&E (Net)

 

 

Investments

 

 

Intangibles

 

 

Other Assets

 

 

Total Assets

 

 

 

 

 

Current Portion of Debt

 

 

Accounts Payable

 

 

Income Taxes Payable

 

 

Other Current  Liabilities

 

 

Total Current Liabilities

 

 

Long-Term Debt

 

 

Other Liabilities

 

 

Deferred Taxes

 

 

Total Liabilities

 

 

Preferred Stock

 

 

Paid in Common Capital (Net)

 

 

Retained Earnings

 

 

Total Common Equity

 

 

Total Liabilities &Common Equity

 

 

 

Note: If your firm has Minority Interest take it as part of Common Shareholder's Equity.

Reference no: EM13504887

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