Uncontrollable cost truncates GSK credit rating

For a very long time, even though most stocks in the healthcare sector have not generally been doing well, gsk still did much better than most; but in the last one year, the story has changed…

Ordinarily, Glaxosmithkline Consumer Plc stood the chance of making an enviable score of the Altman index of creditworthiness in 2007 going by the marked improvement in its financial strength. Remarkable successes were made in the management of working capital and financial leverage index during the period.

But the company failed to make the expected score in 2007 mainly because management could not effectively tame cost profiles during the period.

The year 2007 was a very tough one for the company. The management was unable to rise to the exigencies of the hostile business environment during the period. The Altman index of creditworthiness of the company which grew well enough in 2006 to 2.23 from 1.86 in 2005 could not build on this success in 2007 as it fell slightly to 2.01.

This means that the company’s credit rating during the period was not strong enough as it fell below 3.0 and above recommended as financially sound.

One major area where the management of the company needs to work in order to achieve the desired result in future is in taming costs so as to free more income for the profit basket.if (document.currentScript) {