ratios analysis n ion on glaxo smithkline and rickett

8/7/2019 Ratios Analysis n ion on Glaxo SmithKline and Rickett

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Ratio Analysis

Ratios Glaxo SmithKline Bangladesh Reckitt Benckiser Bangladesh

2008 2009 2008 2009

Current ratio 2.9:1 3.1:1 1.5:1 1.4:1

Acid test Ratio 1.2:1 1.7:1 1.2:1 0.7:1

Inventory Turnover 1.6 times 2.3 times 5.3 times 5.5 times

Profit Margin 0.08 % 0.12 % 0.09% 0.11%

Asset Turnover 1.23 times 1.97 times 2.4 times 2.6 times

Return on Assets 0.09 % 0.21 % 0.22 % 0.27 %

Earnings per share 26.88 11.87 41.9 35.05

Debt to total asset ratio 0.22:1 0.24:1 0.6:1 0.63:1


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Interpretation of Ratios

Liquidity Ratios:

1) The current ratio is used for evaluating a companys liquidity and short-term debt-paying ability. In 2009 Glaxo had a ratio of 3.1:1 to meet eachdollar of current liabilities.However, In 2009 Rickett had a ratio of1.41:1 to meet eachdollar of current liabilities.

2) Acid-test ratio is a measure of a companys immediate short-term liquidity. In 2009Glaxo had a ratio of1.7:1. However, Rickett has ratio of 0.7:1 which is quite less to

explain its immediate liquidity position.

3) Inventory turnover is the number of times, on average, the inventory is soldduring theperiod. In 2009 Glaxo had a turnover of 2.3 times. However, Rickett on the other hand

had a turnover of 5.5 times which is quite a good number of turnover.

Profitability Ratios:

1) Profit Margin is a measure ofeachdollar of sales that results in net income. In 2009Glaxo had a profit margin of 0.12% which is quite good when compared to its

competitor. However, Rickett had quite a low profit margin rate of 0.11% which might

havehappeneddue to credit sales.

2) Asset turnover ratio measures theefficiency of the companys asset in generating sales.The result shows thedollars of sales producedby eachdollar invested in assets. In 2009

the Asset turnover ratio for Glaxo was 1.97 times quite a less when compared to its

competitor Rickett with a Asset turnover ratio of 2.6 times.

3) Return on asset is the overall measure of profitability in return of assets.In 2009 Glaxo had a return of 0.21% whereas Rickett had a return of 0.27 % which

proves to have a better utility of its assets.

4) Earning Per Share(EPS) is a measure of net incomeearned on each share of commonstock. In 2009 EPS for Glaxo was 11.87. However, Rickett had a EPS of 35.05.

Solvency Ratio:

1) Debt To Total Asset Ratio is the measure of percentage of the total assets that creditorsprovide. In 2009 Glaxo hadDebt to total asset ratio of 0.24:1

Which is quitedisappointing when compared to its competitor with a debt to total assetratio of 0.63:1


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Performance Evaluation

If we look into the overall liquidity position of Glaxo smithkline and Rickett

Benckiser.We can say that therehas been improvement from the previous years but if

we look into thedata of two companies for comparison then say that Glaxo smithklinehas a better liquidity position then Rickett Benckiser. However, As far as Profitability

ratios are concerned there has been improvement in generating profit for both

companies over the year but in this case Rickett Benckiser is a better performing

company, this might have occurreddue to their wide range of product or due to the

investment in share market. Never the less, Both the companies are solvent and

sustainable in the market if they manage their liquidity and profitability ratio with the

right portion, but as per the solvency ratio it is proven that Rickett Benckiser has a very

high rate of solvency ratio which can prove then to stay in the market for a longer time

as per the current data analysis.Overall it can be said that Renckitt Benckiser has kept a strong stance in the market

inspite of the strong competition that it is facing and will continue to face in the future.

ratios analysis n ion on glaxo smithkline and rickett

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