Analysis of Economic Environment

Added on - 19 Feb 2020

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ANSWER – PART ATOP DOWN FUNDAMENTAL ANALYSIS OF THE OVERALL ECONOMICENVIRONMENTFundamental analysis is defined as the analysis of the financial position and the financialperformance of the company through the financial statements. The main areas of considerationare the assets, liabilities and the earnings of the company along with the conditions of the marketprevailing at that time and the working of the competitors. The fundamental analysis isconducted through two approaches – one is Top down and other one is Bottom up.In the top down approach, analysis starts with the economy for the company at the global level,then at the domestic level, then the analysis of the particular sector and the industry in which theparticular company is operating and at the last the business of the company is analysed.TOP DOWN APPROACH CHARTIGLOBALIILOCALIIISPECIFICSECTORIVINDIVIDUALBUSINESS
In this section, the analysis has been done through top down approach. In other words, thisapproach takes the bigger things first and the smaller at the last. The fundamental analysis isusually done with the annual financial report of the company as it contains the financialstatement of the company along with the future plans of the company according to the marketconditions. In the following manner the top down approach has been conducted for twocompanies namely – Australian Pharmaceuticals Industries Limited and Mayne Pharma Limited.Both are in the sector of pharmaceuticals.Global Economy– The world has faced the various tragedies relating to thepharmaceutical industry in the year of 1950s and 1960s due to which the new laws andprocedures and the related guidelines have been provided by the government of Australia(Singh, 2017). At this level, the major emphasis has been made on the economies ofscale present across the globe. The research question under this level is that whether theeconomies across the globe are in recession or not. As per the Australian Industry reportfor the year 2016, the forecast for the growth at global level has been reduced from 3.8%to 3.1% which shows that the economy at the global level is in recession (DOI Australia,2016). The effect of the same has been mentioned in the annual report of both thecompanies that the industry in which the company is operating has become competitiveand there are fewer chances for the growth as new and upcoming companies are enteringinto the market. As the GDP rate has come down on the global basis, there are fewerchances of improvement and the future expansions.Domestic Economy– Under this heading, the economy of the country of Australia isanalysed with regard to the medicine industry. As per the Australian Industry report forthe year 2016, Australia has developed the industry growth centre which is known in anabbreviated form as IGC’s for different industries (Shaw, 2008). It facilitates theentrepreneurship and the innovation rather than making the industry dependent on others.The IGC relating to the medicine industry has been known by the name of MTP Connectand its main aim is to drive the industry to grow in terms of the innovative technologies,commercialization and the future expansion. Its second aim is to make Australia as theAsia Pacific hub for the medical and pharmaceutical companies. Following are the majorfactors which are considered while conducting the analysis at domestic level:
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