Accounting and finance report: the case of a pharmaceutical business

Résumé du document

Easter Gate Scientific Supplies Inc. is a major global supplier of instruments equipment and services to the scientific community with a 17.5% market share of the global market, making it the largest business in the industry. E.G is pursuing a strategic growth, seeking to increase its market share through achieving a high volume of turnover at competitive prices, resulting in low profit margins. Part one of this report evaluates E.G's strategy by analyzing its financial performance over the last three years,2004 to 2006, and by comparing it to Axel Scientific AG's (ASc.) one; a current tough competitor owning 5% of the market share. The industry averages will also be considered in order to relate E.G's and ASc's performance to that of the industry as a whole. Parttwo consists of discussions and recommendations about E.G's current strategies, and new ones it could consider in order to reinforce its robustness and competitiveness.

Extraits

[...] Increasing the frequency of purchase It is easier to sell to existing customers. The more often these customers are exposed to E.G. offers, the more likely they will consider it when making a purchasing decision, therefore an increased frequency of purchase could be achieved through effective marketing and promotional strategies. This purchase frequency could be increased further by introducing a loyalty scheme. Increasing the average spending on each transaction The amount that customers spend per transaction could be increased by: Offering volume discounts and incentives Offering complimentary products and services 5. [...]

[...] Thus, breaking down its inventory holding period to 0 days and eliminating the associated costs of the warehouses. Selling warehouses would not only reduce the business' fixed costs but would also generate revenue which could be ploughed back into the business, reducing the total fixed assets and thus increasing the ‘return on fixed assets' in the process. Direct supply would also reduce or even eliminate the need for certain functions of the business such as warehouse workers and managers. The company's management structure could then be accordingly streamlined and excess employees could be made redundant. [...]

[...] of shares Price/ Earning Ratio Market price of share Earning per share Earnings per share NPAT x 100 Equity Book value per share Equity No. Of shares 1.52 Times Interest Cover Ratio NPBIT Total interest charges Debt-to-equity Ratio Total debt x 100 Equity Equity Gearing Total Capital + Reserves x100 Total Liabilities Gearing (Leverage) Ratio Debt x100 Debt + Equity Asset Utilisation Sales Total Assets Fixed Assets Turnover Sales Fixed Assets Inventory Turnover Cost of sales x 365 Average inventory Inventory Holding Period Average Inventory x 365 Cost of goods sold Average Payment Period (Credit period taken) Average Creditors x 365 Sales Average Collection Period Average debtors* x 365 Credit sales *Since we miss 2003 info to calculate the Average debtors for 2004, and in order to remain consistent, we will use the closing balance Return on Equity NPAT x 100 Total Equity (Ordinary Shares + Reserves) Return on Assets NPAT x 100 Total Assets ROI/ ROCE NPBIT x 100 Capital Employed (Tot. [...]

[...] Solvency Ratios This section will analyse the capital structure of the company. Liquidity ratios indicate the company's ability to pay its short-term liabilities on time, offering an objective view of how E.G. is managing its cash and if it does so in the most effective way. Figure 5 : The Ansoff Matrix The most obvious way of increasing market penetration is by acquiring a controlling share in competitor's companies or by eliminating local dealers by taking advantage of economies of scale and pricing them out. [...]

[...] (2006). Foundations of Marketing. 2nd ed. Maidenhead: McGraw Hill, pp. 111- 128. McDonald, M.H.B Marketing Plans : How to Prepare Them, How to Use Them. London : Butterworth-Heinemann Ltd, pp 193-194 McKenzie, W. (2003). Using and interpreting company accounts, 3rd edition. Harlow: FT Prentice Hall. Pallister, J. [...]