Working Capital Management at GlaxoSmithKline

By

DECLARATION

I, Lassana Diane, would like to declare that all contents included in this dissertation stand for my individual work without any aid, & this dissertation has not been submitted for any examination at academic as well as professional level previously. It is also representing my very own views & not essentially which are associated with the university.

Signature: Lassana Diane

Date: 05-10-2012

ACKNOWLEDGEMENT

My thanks go out to all who have helped me complete this study and with whom this project may have not been possible. In particular, my gratitude goes out to friends, facilitator and family for extensive and helpful comments on early drafts. I am also deeply indebted to the authors who have shared my interest and preceded me. Their works provided me with a host of information to learn from and build upon, also served as examples to emulate.

DEDICATION

I dedicate this paper to my family and teachers because without their continuous support I would not have been able to gain knowledge.

Contents

CHAPTER 01: INTRODUCTION8

1.0 Introduction8

1.1 Overview of GlaxoSmithKline9

1.2 Purpose of the Research9

1.3 Aims and Objectives9

1.4 Research Questions10

CHAPTER 02: LITERATURE REVIEW10

2.0 Working Capital Management: An Overview10

2.2 Working capital management: A Part of Financial Management10

2.3 Working Capital Management: A Research Based Overview11

2.3.1 Profitability vs. Liquidity12

2.3.2 Cash Management13

CHAPTER 03: RESEARCH METHODOLOGY13

3.0 Introduction13

3.1 Research Methods Available13

3.3 Justification for the Chosen Methodology13

3.4 Methods for Data Analysis14

3.4.1 Ratio Analysis14

3.4.2 Correlation Analysis14

3.4.3 Regression Analysis14

3.5 Limitations14

CHAPTER 04: DISCUSSION AND ANALYSIS15

4.0 Introduction15

4.1 RATIOS ANALYSIS15

4.1.1 Liquidity Measures15

4.1.2 Leverage Measures19

4.1.3 Profitability Measures21

4.1.4 Asset Utilisation Measures26

4.2 Correlation Analysis33

4.3 Justification for the Results of Correlation Analysis34

4.5 Regression Analysis35

CHAPTER 05: CONCLUSIONS37

Appendix 1: Financial Ratios Description and Formulas40

Appendix 3: Financial Ratios Financial Ratios and Firm Characteristics1

Appendix 4: Descriptive Analysis of Variables2

Appendix 5: Percentage Variation Table based on the Variables and Financial Ratios3

Appendix 6: Correlation coefficient data4

Appendix 7: Regression Analysis data6

REFERENCES8

Abstract

This research study is an attempt to study the management of the working capital at Glaxo Smith Kline. Widespread interest in the field of finance has grown rapidly in recent years, a direct result of both the increasing complexity and volatility of financial markets and intense competition among businesses firms and other organisations to obtain capital from these markets. Academic research in finance in the past has, however, been focused predominantly on various aspects of long-term financial decisions to the relative neglect of working capital management. This is true in spite of the fact the practicing managers spend a disproportionate amount of their time and effort on short-term financial decisions. This research studyhas adopted a statistical technique in order to meet the purpose of this paper. Therefore, regression and correlation has also been applied to this research.

Key words: Working capital, working capital management, liquidity, ratio analysis, correlation, Glaxo Smith Kline.

Chapter 01: Introduction

1.0 Introduction

A key assumption made in the standard theory of the financial management of a firm is that there is no time difference between when costs are incurred and when revenue is received. This assumption is valid only under the assumption of perfectly functioning financial ...