Financial Management and Strategic Analysis

Assignment Brief

The Learning outcome(s) assessed by this assignment are:

All learning outcomes assessed

At postgraduate level you are expected to:

• Have a high standard of presentation, structure, layout and design
• Demonstrate appropriate coverage, critical appreciation and evaluation of relevant literature
• Demonstrate a critical understanding of key concepts and the application of theory to practical solutions

Show evidence of originality of thought and approach, and of creative problem solving ability

Learning Outcomes tested (from module syllabus)

LO1: Demonstrate comprehensive understanding on a variety of financial problems and/or financial opportunities which may be faced by an organisation within its life cycle.

LO2: Critically explain decision making in institutional environments related to corporate finance utilisation and planning and evaluate the sources of finance available to an organisation

LO3: Evaluate advantages and disadvantages of alternative sources of organisational finance and how these contribute to organisational growth including investment, financing and dividend policies and strategies and the conceptual and practical rationales for these.

LO4: Align finance, financial planning, decision making, and strategy to concepts of delivering shareholder value Discuss and evaluate the methods by which a company can grow: (e.g. through organic strategy or through mergers and acquisitions)

LO5: Demonstrate a critical awareness of the role and importance of research in the evolution of corporate finance and evaluate the determinants of a firm’s cost of capital and capital structure

LO6: Demonstrate effective decision making and judgement on matters related to prioritising choices for business investment projects and/or for the allocation of resources organisation

LO7: Critically appraise and understand how firms interact with the capital markets

Task:

Critically evaluate the sources of finance for capital-intensive projects for a company of your choice - listed on a Stock Exchange around the globe. Making use of finance literature, discuss the Agency theory, outlining potential conflict of interest that may arise in raising resources for the intended project.

Your chosen company must operate in one of the following industries of the Stock Exchange: Telecommunications & Utilities, Hospitality, Aerospace & defence, Pharmaceuticals & Biotech, Automobiles & parts.

Critically discuss the following using the listed company selected and

1. Write a brief introductory report on the activities of your chosen company identifying any capital-intensive project(s) they intend to undertake in the near future.
2. Critically evaluate the assumption in corporate finance literature that potential conflict may arise between shareholders and management in sourcing funds for investments.
3. Critically review the various external sources of finance available to your chosen company. These sources of finance must be clearly identified, carefully explained and distinguished.
4. Identify the factors that need to be considered by the management of your chosen company in settling for a specific type of financing for the intended investment.
5. Explain clearly any problems, limitations and assumptions that you need to make to address the above tasks.
6. Give comprehensive but concise recommendations on the capital structure of your chosen company and draw a conclusion.

Sample Answer

Financial Management and Strategic Analysis of AstraZeneca

Introduction

AstraZeneca is one of the world’s largest pharmaceutical and biotechnology companies, headquartered in Cambridge, United Kingdom. The firm operates in more than 100 countries and is listed on the London Stock Exchange, making it a key player in the global healthcare market. The company’s operations focus on research, development, and commercialisation of medicines in therapeutic areas such as oncology, cardiovascular, renal, respiratory, and immunology. Given its size and international presence, AstraZeneca is subject to complex financial, strategic, and operational considerations. This report examines its financial management strategies, sources of finance, agency theory challenges, and the factors that influence corporate financial decision-making, followed by a critical evaluation of limitations and recommendations for improvement.

Critical Evaluation of Financial Management

Financial management within AstraZeneca integrates both traditional and modern approaches. The traditional perspective emphasises maximisation of shareholder wealth through efficient allocation of resources, return on investment, and dividend policy. AstraZeneca has historically followed this approach, with consistent dividend payouts that reassure investors of financial stability. However, the modern view of financial management also highlights risk management, long-term sustainability, and stakeholder value, especially in a sector as sensitive as healthcare.

The company’s financial strategy involves substantial reinvestment into research and development (R&D), which consumes nearly 20 percent of its annual revenue. This high level of reinvestment demonstrates the balance between maintaining profitability for shareholders and ensuring long-term competitiveness through innovation. Yet, financial risks are considerable, including regulatory changes, patent expirations, and pressure from generic competitors. The global COVID-19 pandemic also highlighted AstraZeneca’s role in public health and the delicate balance between ethical obligations and profitability, a challenge that extends beyond traditional financial models.

Sources of Finance

AstraZeneca utilises a blend of internal and external sources of finance to sustain its large-scale operations. Internal financing mainly comes from retained earnings, which fund its substantial R&D projects. External sources include equity financing through its stock exchange listings, providing a platform for raising capital from institutional and individual investors.

Debt financing is also a vital component of AstraZeneca’s strategy. The company issues corporate bonds and secures long-term loans to finance expansion, acquisitions, and ongoing development of its drug pipeline. The mix of equity and debt allows the firm to maintain an optimal capital structure, balancing the cost of capital and financial flexibility. Strategic partnerships, joint ventures, and government funding in certain research projects also act as indirect financing mechanisms, reflecting the collaborative nature of the pharmaceutical sector.

Continued...