Finance For Decision Making | Individual Report On Finance Assignment

March 19, 2024

Finance for Decision Making | Individual Report on Finance Assignment

This is an individual report on finance for decision-making, created for one of our students studying MBA with a specialization in Finance. This finance report will help you understand the various concepts of management and finance that influence the company’s decision-making.

You can also refer to this assignment to understand the structure of a formal finance report which is very helpful in business education. If you need help with your finance assignment or report, reach out to us through the Contact Us page.

Introduction

The contemporary business context is evolving rapidly through the influence of advanced technologies and changing organizational as well as market behavior. Opined by Kadim, and Sunardi, (2022), the financial performance is being diversified through innovating different business models and areas in this Industry 4.0. Organizational managers need to incorporate interpersonal roles in different organizational difference decision-making by evaluating the objective and quantitative data. The analytical skill of this vast range of data is essential in this digitally predominant era of business management. However, one of the leading pharmaceutical business organizations in the UK, GlaxoSmithKline (GSK) Plc signifies a distinct stiff set of developments. The current organizational skills focusing on financial data management by the managers need to be evaluated through a diverse range of secondary data. Investigating the roles and responsibilities of managers focusing on skills of qualitative and quantitative analysis is essential to influence strategic developments. This report focuses on secondary data reached through quantitative and qualitative analytical approaches to the financial data management of the FTSE 100 listed company GSK Plc. and other relevant organizational data. The methodological approach of analyzing financial performance and strategic planning essentially ensures a higher degree of credibility and authenticity in this study.

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Research background

As the organizational business environment is rapidly changing, understanding the transforming aspects of organism management is essential for contemporary managers. Identifying the issues in financial management with quantitative and qualitative approaches allows the managers to incorporate effective decision-making for the organizations to ensure positive changes and improvement in operational and management processes (Shapiro, and Hanouna, 2019). Managers must incorporate both quantitative and qualitative approaches with effective strategic incorporation in workplaces. However, the case study of GSK Plc with the data on financial management essentially clears an effective environment of the evolution of qualitative and quantitative analysis skills. On the other hand, critical analysis has the potential to create effective strategic decision-making for managers to enhance the skills of qualitative and quantitative analysis. in a contemporary organizational environment. As the financial infrastructure is changing rapidly with innovating in business models and new business scopes (Brigham, and Daves, 2018). This study essentially creates an in-depth understanding and knowledge of contemporary business processes and decision-making. Apart from that, as the pharmaceutical industry is rapidly transforming in the post-pandemic era, the critical evaluation of the company ensures a higher degree of knowledge development in contemporary organizational business practices.

Methodology

This report focuses on the incorporation of a diverse range of secondary data on competently contemporary business, management, and financial management of one of the leading pharmaceutical companies GSK Plc. Selecting the business operations and reports based on the United Kingdom incorporation and critical evaluation of this data with qualitative and quantitative approaches requires an effective selection process for the secondary data sources (Greckhamer et al 2018). However, a wide range of research journals, articles, and digital media was incorporated into this study to collect a diverse range of secondary data on financial management and current business practices. On the other hand, the secondary data analysis incorporated the quantitative and qualitative data analysis methods for evaluating the wide range of secondary data selection criteria of this vast range of data sources signifies the assessment of abstracts and titles of the research journals as well as the relevant research keywords. According to Mitchell, and Education, (2018), this desk-based approach of secondary data analysis in this report has the potential to create efficient results and effective results through critical analysis. However, the ethical consideration of this study signifies the confidentiality and authority of the original authors with appropriate referencing. However, the lack of permission from several websites to access data was a significant constraint in the data collection method.

Literature review

Theoretical approaches to financial management

Contingency theory

Contingency theory signifies that there is a diverse range of various contextual factors which determine the organization’s operation and management focusing on different elements like business history, capital budgeting control policy, or the degree of professional competency. This theory refers to the interlinking of these contextual factors as a representation of a management system. However, the situational approach of this theoretical concept ensures a higher degree of automation among different organizational issues that impact the financial performance of a company (Ameliawati, and Setiyani, 2018). On the other hand, the proposition of the theory signifies that some factors can be effective for a company or unable to impact positively on other business organizations. The implication of financial management through these factors essentially influences the overall operational development of a business organization in a specific industry. Apart from that, contingency theory also focuses on the balance between the corporate environment and the financial system operations to influence influenza apartments of business organizations. However, according to Waheed, and Malik, (2019), this theory signifies that emphasizing the difference between internal and external organizational factors, organizational behavior, and financial management have no standard approaches to achieving organizational goals.

Cash Conversion Cycle Theory

Figure 1: Cash Conversion Cycle
(Source: Pavlis et al., 2018)

The Cash Conversion Cycle is essentially important for the business organization as it allows one to understand and measure the required cash for operational aspects of the business. The cash Conversion Cycle theory signifies that a bigger cash conversion cycle is better for the financial performance of a business organization in this contemporary business environment. Pavlis et al., (2018), suggest that the longer time the company takes for converting the investment to cash flow through sales expands the financial infrastructure of the company. However, according to this theory, individual business elements are essential for investigating the appropriate conversion cycle that can enhance the overall financial performance of a company. On the other hand, the shorter cycle signifies that the business organization is required to extend the capacity of assets to perform more. Apart from that, the management cycle expansion suggests the business development that has hired benefits along with sustainability. However, influencing the cash conversion cycle of business organizations has the potential to incorporate effective financial activities to enhance the capacity of transactions and enhance financial performance (Dirvi et al., 2020). Evaluating the revenue as the response to the financial activities, business organizations can emphasize the business transactions for higher cash flow to minimize the utilization of the assets.

Trade Off Theory

This trade-off theory focuses on the differences between the cost of money for distress and tax benefits for debt utilization influencing the debt capital structure of the company. This theory signifies that the last capital structure implemented for a company in this way is considered as the trade-off between the cost and advantages. However, this factor signifies the achievement of targeting an optimal debt-to-equity ratio (Giambona et al., 2018). On the other hand, the optimal capital structure has the potential to maximize the benefits with the minimization of cost. Apart from that, this proposition of the theory signifies the optimal capital structure through the leverage regarding capital mix until the attainment. On the other hand, the high level of debt in companies is very risky as the investors are not interested in the trade-off theory (Deegan, 2022). Emphasis is on the mixed results of developing a capitalist structure, as well as the profitability of a business organization.

Financial data of GSK Plc. –

Figure 2: Operating profit and margin data of GSK Plc. in 2016-2017
(Source: GlaxoSmithKline Plc-Annual reports, 2017)

The operating profit and margin of GSK Plc. in 2017 signifies the focus on sustainability incorporation and emphasis on post-Brexit business operations in the UK. The impacts of Breit effectively influenced the operating costs and business development issues that impacted the financial performance as well as the profit margin of the multinational pharmaceutical company GSK Plc. The adjusted growth this year signifies 28.4% in operating profit (GlaxoSmithKline Plc-Annualreports, 2017).

Figure 3: Financial performance data of GSK Plc. in 2018
(Source: GlaxoSmithKline Plc-Annual reports, 2018)

The annual report of GSK Plc. shows that the cost of sales against the turnover was 33.2% which signifies the rising demand for the product mix of vaccines and consumer healthcare (GlaxoSmithKline Plc-Annualreports, 2018). On the other hand, operating profit refers to £5,483 million ensuring a 17.8% rise compared to the previous year. However, the adjusted earnings per share in the year was 73.7p.

Figure 4: Financial performance data of GSK Plc. in 2019
(Source: GlaxoSmithKline Plc-Annual reports, 2019)

The annual report of the year 2019 report shows the importance of major restructuring programs of GSK Plc along with the impacts of the Joint Venture with another leading pharmaceutical organization Pfizer. The gross profit of £21,891 million refers to adverse pricing pressure in the UK pharmaceutical industry (GlaxoSmithKline Plc-Annualreports, 2019). The Annual Equivalent Rate (AER) and Coupon Equivalent Rate (CER) rose by 1.9% and 2.4%.

Figure 5: Financial results of GSK Plc. in 2020
(Source: GlaxoSmithKline Plc-Annual reports, 2020)

The emergence of the COVID-19 pandemic impacted the business of GSK Plc. this year. The incorporation of emergency measures and serial lockdowns has reduced direct sales but the vast range of vaccine development and other medical services influenced the profitability of the company. However, the adjusted earnings per share signify 115.9p in 2020 with a free cash flow of £5,406 million (GlaxoSmithKline Plc-Annualreports, 2020).

Figure 6: Adjusted financial results of GSK Plc. in 2021
(Source: GlaxoSmithKline Plc-Annual reports, 2021)

The post-pandemic market development this year signifies the re-evaluation of the business approaches in the UK with an extensive level of collaboration in the business environment. Operating profit was 8,806 signifying the valuation of 25.8% of the turnover in the year (GlaxoSmithKline Plc-Annualreports, 2021). However, the profit of £8,906 million after taxation refers to the rise in the value of a share in the UK market.

Financial Analysis and Discussions –

The financial data of GSK for the last five years signifies effective changes in the financial performance of the pharmaceutical business organization. The impact of Brexit and the new regulations in the European Union market signals significantly impacted the business operations and profitability of the company. The increase in operating costs in 2017 created an effective impact on the financial performance by lowering the profit margin of the company. Compared to that, the adjusted growth of the company insured 28.4% in operating profit compared to the previous year which essentially created a positive on the financial infrastructure of GSK Plc. However, the evolution of the pharmaceutical industry is playing a vital role through enormous levels of investments in advanced digital technologies to enhance the quality of service and product development in the healthcare market (Rizhamadze, 2020). GSK Plc focuses on diversified product lines and new service developments, the financial performance is now reshaping the profit margin by creating business in the untapped market. Innovation and technological advancements directly impact the costs and profits of pharmaceutical companies for developing new business approaches and business model innovations. However, the annual report of 2018 shows that the cost of sales against the turnover significantly increased. The company gained a significant hike in operating profit by 17.8% Coming back to 2017.

The adjusted earnings per share dinner did not differentiate much. Apart from that, the company has a significant amount of net finance costs that influence the profit on disposal and share of after-tax profit. Bilbao-Terol et al., (2018), argue that due to the collaborations, the diversified product mix focused on vaccines and consumer healthcare played a vital role in the 2018 financial performance of GSK Plc. The profit gained from the joint ventures and the cost of collaboration plays a vital role in the changing pharmaceutical business development in Industry 4.0.

The operating profit of £6,961 million signifies 20.6% of the total turnover of GSK in 2019. The gross profit was essentially raised due to the effective business development in the pharmaceutical industry through joint ventures. Joint ventures like Pfizer created a significant factor for business performance, as well as the profitability of GSK in the year. However, the company faced a significant amount of rising pressure in the pharmaceutical industry, which influenced the operating profit as well as the sales income from sales and profit disposal of interests in associates. The investors played a vital role in this year as they were interested in the joint venture approach of the company which can impact the pharmaceutical industry of the UK. Utilizing the business infrastructure and resources of the joint venture companies essentially helps the business organization to develop long-term embedding in the market dynamics of the pharmaceutical industry (Brigham, and Daves, 2018). However, this year the rise in AER signifies the overall growth of the financial structure of the company and business development in the competitive market. The quantitative approach towards the AER in 2019 refers to the rising earnings against the investment of the company in that year. On the other hand, accounting of the taxation and yield signifies the rise in interest rate for the investment which impacts the financial management of the company. On the other hand, when investing in income securities, the rising sea of the company reverts to the yield on the zero coupon bond which influences the financial structure and performance in a year. However, with consistent incorporation of digitalization and business model innovations, GSK Plc has developed an effective profit margin in the competitive market through strategic alliances and innovative duct and services (Garcia, 2020). The data analysis on the market and business development higher degree of business scope, which can impact the financial performance directly.

The report shows that 2019 was crucial for the pharmaceutical business organization GSK Plc due to extensive levels of changes in business operations and market dynamics. An enormous level of impact of the pandemic through the severe lockdowns and other health measures directly impacted the supply chain and the normal workplace of the company. The cash flow of £5,406 million ensured a higher degree of flexibility in the operational management of the company. On the other hand, the adjusted earnings per share this year was raised to 115.9p ensuring a higher degree of interest to the investors in the company during the pandemic crisis (GlaxoSmithKline Plc-Annualreports, 2021).

The emergence of the pandemic has created significant changes and changes in the emotional and psychological aspects of the investors which impacted the overall financial performance of GSK (Tsangari, and Mantara, 2021). Compared to that, post-pandemic recovery in 2021 shows significant demand for shares and sustainable pricing at 113.2p. On the other hand, the operating profit was £8,806 million focusing on the mass production of vaccines and medical support in the UK market. This factor signifies the identification of business scopes and recovery strategies of GSK in the post-pandemic pharmaceutical industry.

Conclusion

The evaluation through the diverse range of secondary data analysis shows that incorporation of the empirical data through the annual reports of the pharmaceutical business organizations refers to an incorporation of a vast range of secondary data to enhance the overall insight into the organizational operations and management.

On the other hand, the pharmaceutical market was being redefined through the emergence of advanced technological incorporations and innovative business models by addressing the changes in consumer behavior and market dynamics due to the impact of the pandemic. The literature review and the qualitative data evaluation show that by focusing on integration and collaboration, GSK Plc emphasized creating effective medical services that can create a higher degree of profitability and sustainability by identifying opportunities in the changing market.

References

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