Accounting 3015 Case Study: Various Financial And Non-financial Ratios (Coursework Sample)
In this business case study, the focus was to critically examine three pharmaceutical companies in uk using financial and non-financial ratios to understand which is the most suitable company to invest on. The writer was also required to make recommendations for the worst performing company.source..
ACC 3015 CASE STUDY
When making investment decisions, an investor might be guided by both financial and non-financial ratios. According to Kolcan et al. (2013), ratio analysis is important in aiding investment decisions as they not only reveal how a firm has been performing over time but also compare different companies within the same industry enabling investors to zero in on the best option. Relatively, non-financial ratios address deep crisis and shortcomings of financial ratios (Milost, n.d). Hence, it is important to use both financial and non-financial ratios while making investment decisions. This report will rely on various Financial and non-financial ratios to ascertain the best performing company between GSK, AstraZeneca, and Shire and offer recommendations accordingly.
2.0 Financial Ratio Analysis
2.1 Liquidity Ratios
2.1.1 Current ratio
Usually arrived at by dividing current assets by current liabilities, current ratio has been chosen in this report as it measures the liquidity stand of firm (Costea and Hostiuc, 2009). The rule of thumb is that the higher the current ratio, the better. For GSK, current ratio increased between 2014 and 2015 before notably decreasing by 0.36 by end of 2016. Improvement in 2014-2015 can be attributed to reduced current liabilities which declined from million Euros 2943 to 1308 before dramatically increasing to 4129 in 2016 (GSK, 2015; GSK, 2016). With improvement on sales in vaccines, it is possible that GSK was in a position to settle shot term borrowings. Similarly, AstraZeneca
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