Financial Performance of AstraZeneca - Essay Example

Financial Performance AstraZeneca believes in generating value for its shareholders and aims to achieve a consistent and sustained financial performance. This is evident from following financial aspects of the firm: Revenue The sales patterns are increasingly showing an upward trend. The net revenue of the firm during 2003 was $ 18.849 Billion whereas the revenues during year 2007 were being recorded at $ 29.559Billion. This shows an overall increase of 57% over the period of five years. The increase of more than 50% in revenue suggests that the firm has been able to achieve consistent growth in its revenues over the last five years.1 Operating Profit Operating profits were at $4.111 Billion in year 2003 whereas in year 2007, the firm has been able to increase its operating profit to $9.060Billion. This is an increase of more than 100% i.e. 120%. The increase in operating profits suggests that the firm has been able to curtain and control its costs. Earnings per Share Earnings per share of the firm during 2003 were $1.78 per share which increased to $4.20 per share. Again company showed an improvement of more than 100% in terms of recording consistently high performance. Since EPS or Earnings per share is one of the strongest indicators of better performance therefore shareholders tend to view this figure with much interest as it serves one of the strongest price indicators in the market. Further, EPS is also one of the highly used methods of assessing fair value of securities. Dividend Payment Policy Firm’s dividend policy involves the payment of consistent dividends both at the year end as well as during interim periods. Firm paid two interim dividends during the period of 2003 i.e. a first interim dividend of $0.255 and a second interim dividend of $0.54. Similarly, during first interim dividend of $ 0.52 per share and a second interim dividend of $1.35 was paid to the shareholders. This trend further outline that the firm is a consistent dividend payer and it is because of the consistent increase in dividend payout ratios that the firm’s stock price consistently increased. Importance of Treasury Management The increasingly complex business world of today requires that the financial management as well as treasury management within organizations shall also keeping on changing to accommodate such changes therefore the modern day treasury professional not only require to be good professionals but must also possess great business acumen. It is also argued that the concern for reducing cost as well as achieving more efficiency require that the treasury management shall also incorporate the strategic orientation into this whole process .(KPMG, 2008). Treasury management is one of the most critical aspects of overall financial management in any firm. The primary function of a treasury is the effective management of assets of the firm therefore it is important that the people involved in the overall treasury management process at the firm must have the necessary skills and abilities to manage the assets of the firm. The essential function which is being performed is the management of assets and liabilities of the firms. Large organizations such as AstraZeneca tend to make investment decisions therefore treasury’s role is to support that process of decision making. However, treasury is also critical because of the fact that it performs a vital function within the organization. Any misutilization of assets can seriously create critical financial constraints for the firm. Treasury management is currently being viewed more as a process of financial risk management where most of the firms are increasingly consider effective treasury management as financial risk management because the increasing complexities of the financial instruments especially derivatives, due to their highly leverage nature, pose a greater threat to the overall success of the firm therefore treasury management has become more important because it has direct links with the financial risk management process within the organization.(Dolde,2005). Apart from that treasury is also critical because of its role in managing the liabilities of the firm. Making prudent investment of firm’s assets provide returns however if liabilities are not managed properly than organizations can face the wrath of imprudent management. What happened at Enron is the result of imprudent liability management as the firm continuously tried to cover up their losses arising out of their positions on financial derivatives. It is therefore, critical that the firms like AstraZeneca must prudently manage its treasury functions. Global Harmonization of accounting standards Harmonization of accounting standards would result into more transparency as well as promotion of free trade and investment because by following a set of standards would mean same reporting mechanism for almost all the organizational entities. Though with the passage of time, businesses are expanding themselves into different continents therefore global companies also require global standards which can force them to report all the financial information in one clear and harmonized way. Since organizations relocate to different places due to cost cutting and achieving more efficiencies however on the other side of it is the fact that most of the organizations also attempt to exploit the tax benefits and lax accounting standards in those countries therefore the harmonization of accounting standards on global may not be practically possible because it can seriously hamper the progress of organizations towards achieving their competitive advantage. (Brouwer, 2005). It is also critical to understand that most of US companies including their subsidiaries are required to report their results in IFRS therefore harmonizing standards on global level would be a much difficult task therefore there is a need to provide a combine platform which can achieve that synchronization of standards. Further the harmonization of international standards would provide a universal level playing field for all the players and would provide investors a consistent set of financial information to make important investing decisions.(Weber,1992). Conclusion AstraZeneca is one of the growing firms as it has been able to perform consistently over the period of time. However, to remain successful and continue to derive value for its shareholders, it needs to focus more on its treasury management practices besides aligning its accounting policies with all its subsidiaries at global level. References 1. Dolde, Walter. (2005). THE TRAJECTORY OF CORPORATE FINANCIAL RISK MANAGEMENT. Journal of Applied Corporate Finance. 6 (3), 33 - 41. 2. KPMG. (2008). Finance and Treasury Management: Navigating the way. Available: http://www.kpmg.fi/Binary.aspx?Section=174&Item=4678. Last accessed 24 November 2008. 3. Rob Brouwer,. (2005). International Accounting Standards: Do They Make Business Sense?. Available: http://www.kpmg.ca/en/news/documents/Speech20051128.pdf. Last accessed 24 November 2008. 4. Susan Thetford. (2005). Global Accounting Harmonization: A Challenging Change. Available: http://www.nysscpa.org/trustedprof/405/tp5.htm. Last accessed 24 November 2008. 5. Weber, Cameron M.. (1992). Harmonization of international accounting standards..Available: http://www.allbusiness.com/accounting/methods-standards/339832-1.html. Last accessed 24 November 2008. Read More