BMAN20081:BMAN20081

SECTION A (60 marks)

Answer BOTH questions Please refer to the ACCOMPANYING INFORMATION (extracts from GSK plc Annual Report 2019) when answering questions 1 and 2.

Question 1

Calculate the following ratios from GSK’s consolidated financial statements for both the year ended 31 December 2019 and the year ended 31 December 2018, clearly showing the written formulae and your detailed workings:

The closing market share price as at 31 December 2019 and 31 December 2018 was £17.79 and £14.91 respectively.

i. Return on capital employed

ii. Return on shareholders’ equity

iii. Net asset turnover

iv. Operating profit margin

v. Gross profit margin

vi. Intangible asset turnover

vii. Receivables days

viii. Capital gearing

ix. Dividend cover x. Cash generated from operations as a percentage of operating profits

xi. Dividend yield

xii. P/E ratio (20 marks)

Question 2

Assume that GSK has launched a recruitment drive for new commercial managers. You are required to prepare a report that analyses and interprets GSK’s 2019 results to enable potential employees to make a decision on whether or not GSK would offer a sustainable future for a long-term career.

You should make reference to ratios calculated in part a) where they are relevant to this audience, and any other information you feel is relevant, and clearly explain how the information and comments you have provided will be helpful to potential employees. (40 marks)

SECTION B (20 marks)

Attempt ONE question in Section B

Question 3

a) Describe the steps that companies should take in setting out their strategy, and provide examples for each step from any one of the group project companies. (12 marks)

b) Explain how understanding the strategy of a company might help a financial analyst and give examples of how it helped you in your group project. (8 marks) (Total 20 marks)

Question 4

Explain how an understanding of legitimacy theory and institutional theory can help us understand why companies choose to provide narrative and non-mandatory information. (20 marks)

SECTION C – 20 marks

Attempt ONE question in Section C

Question 5

a) Explain the efficient market hypothesis and the different forms of market efficiency that can exist. (10 marks)

b) Assume that you are an analyst advising a potential investor. If markets were to change from their current form to become strong form efficient, explain which parts of your current advice would change and which would remain the same. (10 marks) (Total 20 marks)

Question 6

Lenders and credit analysts comprise an important user group for company financial information. Explain the aspects of a company’s annual report that this user group may be interested in, and why they are interested in these aspects. (20 marks)