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Give a concise description of how AZN is financed, with reference to the different sources of capital and gearing levels.

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Introduction

Give a concise description of how AZN is financed, with reference to the different sources of capital and gearing levels. Analysis of AstraZeneca's (AZN) 2001 annual report1 reveals that the company is financed by all the traditional methods. The sources of finance which are employed to fund AZN operations comprise of; > Creditors due within one year (short-term). > Creditors due after more than one year (long-term). > Capital and reserves (Capital and Reserves). A detailed break down of the sources of finance employed are detailed below in Table 1 'AstraZeneca's Sources of Finance.' and Diagram 1 ' Ratio Analysis of AstraZeneca's Financing.' �m �m �m % % Sources of Finance 2001 2000 Variance Variance Total Financing Creditors due within one year Short term borrowings 150.7 88.7 62.0 41.1% 1.3% Current instalments of loans 75.4 62.0 13.4 17.8% 0.6% Other creditors 4,337.3 4,706.3 -369.0 -8.5% 36.0% 4,563.4 4,857.0 -293.7 -6.4% 37.9% Creditors due after more than one year Loans 447.2 444.4 2.8 0.6% 3.7% Other creditors 107.0 208.5 -101.4 -94.7% 0.9% 554.2 652.8 -98.6 -17.8% 4.6% Capital and reserves Called-up share capital 307.0 311.3 -4.2 -1.4% 2.6% Share premium account 235.2 165.5 69.7 29.6% 2.0% Capital redemption reserve 6.3 2.1 4.2 66.7% 0.1% Merger reserve 304.9 304.9 0.0 0.0% 2.5% Other reserves 1,035.2 1,021.8 13.4 1.3% 8.6% Profit and loss account 5,002.8 4,899.3 103.5 2.1% 41.6% Shareholders' funds - equity interests 6,891.5 6,704.9 186.6 2.7% 57.3% Minority equity interests 25.4 14.8 10.6 41.7% 0.2% Shareholders' funds and minority interests 6,916.9 6,719.7 197.2 2.9% 57.5% Total Financing of AZN 12,034.5 12,229.6 -195.1 -1.6% 100.0% Table 1: AstraZeneca's Sources of Finance Diagram 1: Ratio Analysis of AstraZeneca's Financing Creditors due within one year. Creditors due within one year are individuals or companies to whom AZN owes sums of money to within one year. For AZN these include goods and services2, taxes and short-term loans (includes bank overdraft). ...read more.

Middle

The average gearing of companies in table 7 is 7.92, hence, AZN is 22% below the average, however, it can be suggested the level of gearing is seen as being appropriate in comparison to the average of table 7 and because it is able to cover interest payable 47.3 times. Diagram 2: Industry Gearing Level comparison. 2. a) By reference to the company's five-year record describe the company's earning per share history. Earnings per share (EPS)11 is frequently used to view performance. It indicates how much of AZN's profits can be attributable to each ordinary share. EPS can be seen as a better comparison of performance rather than profit. This is because acquisition or the issue of new shares does not effect EPS, hence, providing a more true reflection of AZN's performance. AZN's EPS12 for the last five years 13can be seen in Table 4 and in Diagram 2. � � � � � 2001 2000 1999 1998 1997 EPS � 1.25 1.24 1.08 1.01 1.02 Variance �m 0.01 0.15 0.07 -0.01 0 Variance % 0.6% 12.5% 6.5% -0.7% 0 Table 8: AstraZeneca's Five-year earning per share history. The five-year EPS history of AZN as shown in Table 6 shows that EPS took a �0.01 loss from 1997 to 1998 to �1.01 from �1.02. Nevertheless, since 1998 AZN has seen an in crease in EPS in each year from 1998. The biggest increase in EPS was in 2000 when EPS increased �0.15 (12.5% on 1999 EPS) from �1.08 in 1999 to �1.24. Finally, there was a slight increase in EPS on 2000 in 2001, AZN EPS saw an increase of �0.01, taking EPS to �1.25 in 2001. According to Merrill Lynch, 'Morning Meetings Notes - 4th February 2002', state that AZN is estimating EPS midway between �1.06 to �1.17 range for 2002 and Merrill and Lynch14 estimate �1.11 EPS for AZN in 2002. Diagram 3: AstraZeneca's earning per share year on year comparison. ...read more.

Conclusion

Comments ~ Figures used in this report have been converted from USD $ to GBP � at a rate of 1.42 1 AstraZeneca Annual Report 2001: Balance Sheet, page 48. 2 AZN other creditors include: Insurance obligations for group insurance subsidiaries' exceptional charges, synergy and integration costs. 3 AstraZeneca Annual Report 2001: Notes to Financial Statements; Note 17, Page 69. 4 Interest to be paid; AstraZeneca 2001 Annual Report, page 49 in Statement of Group Cash Flow. 5 Profit before interest and tax; AstraZeneca 2001 Annual Report, page 46 in Group Profit and Loss Account. 6 AstraZeneca Annual Report 2001: Balance Sheet, page 48. 7 Current Ratio is calculated by dividing current assets over current liabilities. 8 Acid Test Ratio is calculated by dividing current assets less stock over current liabilities. 9 Being able to pay one's debts as they fall is know as being 'Liquid'. 10 The industry sector average of 38.65 was obtained from www.moneycentral.co.uk. 11 AstraZeneca Annual Report 2001 and 1999: Notes to financial Statements; Note 9. EPS used in report is 'EPS per Ordinary Share before exceptional Items. 12 Earnings per Share (EPS) is calculated by FRS 14 simplified formula, which is the net profit or loss attributable to ordinary shareholders divided by the number of the average ordinary shares outstanding during the period. 13 Five-year record is a summary indicator which potential investors can study in order to assess the progress of a company over a reasonable period of time. 14 Information from Merrill Lynch 'Morning Meetings Notes - 4th February 2002' report, www.mlhsbc.co.uk 15 *In April 1999, Astra AB and Zeneca Group PLC merged to form AstraZeneca. Dividends for 1997 and 1998 are calculated by combining the dividend payments for Astra AB and Zeneca Group PLC in 1997 and 1998. Dividends in Astra AB are presented in SEK, these were divided at a rate of 14.711 and then combined with the dividend payments in Zeneca Group PLC. 16 Financial Times Newspaper, Monday 11th March 2002. ?? ?? ?? ?? 1 ...read more.

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