Finance & Financial Management Individual Assignment

This report discusses about the financial accounts and financial management based tasks and operational projects in two different organisations with another sectors in which one is deal with fuel and natural gases corporation and another deals in pharmaceuticals biotechnology organization. It includes the calculation of mean, standard deviation and variances of monthly returns of two inventories individually, formulation of risk of portfolio and return in different report schemes, implementation of performance consider individual and portfolio results in a graphical form, measurement of low variance portfolio also with the optimal weights at which outcomes will be more and recommendation to the investor on choosing of the inventory and suggest them if the assets are present to the investor.

Finance & Financial
Management Individual
Assignment

Table of Contents
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
PART 1............................................................................................................................................2
1.a Explain in brief about the two chosen organisations........................................................2
1.b Calculate mean, standard deviation and variances of monthly returns of two inventories
individually.............................................................................................................................3
1.c Show various comments on the performance recorded and give suggestion related to that:
................................................................................................................................................4
2.a Formulation the risk of portfolio and return in different report schemes:........................5
2.b for implementing the performance consider individual and portfolio results in a graphical
form:.......................................................................................................................................6
2.c The productive boundary element of both the securities:.................................................6
2.d Measurement of low variance portfolio also with the optimal weights at which outcomes
will be more:...........................................................................................................................7
2.e Recommended to the investor on choosing of the inventory and suggest them if the assets
are present to the investor:......................................................................................................8
Part 2................................................................................................................................................8
1. Required rate of return........................................................................................................8
2. Dividend discounted policy................................................................................................9
3. compare the market value with the above calculated value:............................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
1

INTRODUCTION
This report discusses about the financial accounts and financial management based tasks
and operational projects in two different organisations with another sectors in which one is deal
with fuel and natural gases corporation and another deals in pharmaceuticals biotechnology
organization. The firms come into the reflection are Shell and Astra Zeneca which mainly
focuses in providing the better qualitative products to its consumer over a specific period of time.
This project report develops as under the concentration on gathering of inventory related
information in a time duration of five years. It also calculates the mean, standard deviation and
variances for particular data categorize and put this into the one place. It also provides the
direction for evaluating the results being provided by the entity over a certain period of time. On
the other side, one can relate performances and outcomes being formulated for a given point and
finding paths that would subscribe in improving the current outputs which keeps future
expectations in their mind. There are some techniques which involves dividend discount model
and total pay-out methods which are implemented for taking into comparison and knowing how
the firm can try to better its productivity over a time period (Ahiakpor and et.al., 2021).
TASK
PART 1
1.a Explain in brief about the two chosen organisations.
 Shell: This organization is a largest oil company in the world. Basically it provides
various of goods and services which involves oils, fuels and car services along with the
consideration, manufacturing and purifying of petroleum products. In general, this
company is mainly deals in oils and fuels products and they provide good services to
their customer. This business is use innovative and better technology to assist
establishing a supportable energy in future. They also invest their money in power which
involves low-carbon sources like wind and solar energy, fresh fuels for transportation
purpose it only possible with innovative Biofuels and Hydrogen. The main purpose of the
organization is to improve the power along with more and cleanser energy results and
also it necessary to manage climate fluctuations it simple means there is global change
under path to a low- carbon energy scheme. (Alakaleek and Cooper, 2018).
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 Astra Zeneca: It is a type of organization which are multinational and biotechnology
organization. Basically the main business is to planned and supply the growth through the
innovative and advance technology. They have three strategic importance: research and
development and commercial purposes have been planned to take quick decision making
and the execution of fresh medicines across our main disease fields such as Bio
Pharmaceuticals and frequent disease. The main goal of the company is to change the life
of billions of people for the good and report some of the largest healthcare issues are
facing humans. Its main motive is to stop the progress of these life threatening situations
this company want to accomplish the cure from that diseases. The important values and
functions assist to explain the customer about its existence, what they want to achieve
and the actions they value the most, how they will accomplish their goals and objectives
and the promise they give to their stakeholders towards the brand of the company. (Alam,
Gupta, and Zameni, 2019).
1.b Calculate mean, standard deviation and variances of monthly returns of two inventories
individually.
Mean: It can be described as a simple calculation of mathematical average of a merger of
two or more amounts. It is formulated for measuring the centre point of an information
set which developed in numerical terms. Mean is basically related with all interpretations
and observations. Here are different types of mean which involves weighted mean,
geometric mean, harmonic mean arithmetic mean. The performance of mean is recorded
for Shell firm is -31% and in case of Astra Zeneca it provides an outcome of 122%.
Standard deviation: This formula is also calculated in a form of square root of variance.
Basically in finance, it is probably useful for calculating the risk which are related or
involved in an asset. It formulates that how much a person information establishes
various forms of averages in a form of data set (Bruna and Lahouel, 2022). The
application of business management which are truly related to the standard deviation are
useful in calculating the margin of error. If any problem come into the way of customer
satisfaction related observations, and the volatility of inventory rates and more. It also
provides a high informed image and determine that in what ways basic information and
data is being dispersed. Some extreme amounts create less impact. It also calculates some
risk in which an investment helps to observe the changes to keep the records of expected
3

return. Standard deviation throws back a figure of 7.33 in the report of Shell company
and Astra Zeneca it reports a value of 6.44. Hence, it is concluded from the report that
Shell firm has less productivity and reliability as compared to Astra Zeneca thus, it
records that it comparatively less valued as compare to the other. (Dai and et.al., 2021).
Variance: It can be explained that the calculation of spreading the values among the
dataset. Many of the investor use such technique for determining and analysing the risk
related with the business. It’s very important part of every firm to check company
portfolio before investment. This technique is very helpful and profitable for the investor.
It is also helpful for showing comparative results of each and every occupy assets which
are already available into the portfolio for accomplishing the better asset locator. It also
assists to know how better mean is showing an overall set of data, higher the opportunity
of variance shows the range to remain stable within the established development.
Basically Shell company recorded the variances is 53.79 and in case of Astra Zeneca it
shows a figure of 41.44. On the other hand, it can also discuss about the specification of
high variance inventory and they try to do well for their investors who wants less risk
while, low variance stock is highly observed and associated with less risk and low returns
(Darestani Farahani and et.al., 2022).
1.c Show various comments on the performance recorded and give suggestion related to that:
 It was highly observed that Astra Zeneca lowest variance has been recorded as compare
to the company Shell which assists to know that there are comparatively high changes
show in their recorded performances. When it compared to the another firm which has
been selected. Hence, it is suggested that the investors should necessary to go for the
Astra Zeneca company. If they were plan to adapt for lower risk and threats which
included in the procedure of outcome. on the other hand, if they adapt to choose higher
risk and more returns then they can go with Shell organization.
 Astra Zeneca is recorded the standard deviation only for the higher amount as compare to
the firm Shell then its suggestion for the both users and investors who want to join and
invest their money in the organization must have to choose Shell organization because
the amount of the entity are observed to be less scattered as compare to the another
selected entity (Ermasova and Mikesell, 2019).
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 Mean shows the average computation and formulation for a related firm and the average
rate of return that has been come up for Astra Zeneca is 122% which express that their
result has been better in comparison of Shell. The Average return of Shell company has
been come out at -31% on an approx. It implements that their earning is less when it
compares to Astra Zeneca outcomes over the specific period of 5 years beginning from
2017 to 2021. on comparing the outcomes of both the firms it is a suggestion for the
investor to invest their money in Astra Zeneca apart from Shell till they get good returns
on their investment.
2.a Formulation the risk of portfolio and return in different report schemes:
The practical measurement on various report schemes has been formulated on the excel
spreadsheet. In relation with various amount of investment, the results that has been draw will be
included below:
 when the mean has been related in various report schemes, the average rate of return is
increased when the ratio of both the inventories 10:90 has been create in Shell and Astra
Zeneca and the return that comes out for the investor will be -31% as calculated in the
excel spreadsheet. On the other hand, it also recommended that the investor who invest
the money in the securities in the above ratio to become the more returns. The method of
standard deviation describes the risk in the security and such risk has been less when
investment is to be successful in the proportion of 90:10 in both the security. The
variance of the company portfolio is happening in that case only when the investment is
to be successful in the proportion of 90:10 in the above securities the value is to be 52.73.
the whole conclusion is that the investment which made an individual security that
investor face the loss in that situation and if both the inventories are considered then the
return will be more and the risk will be diversified that will provide an advantage to the
investor as well (Glaum, Schmidt, and Schnürer, 2018).
2.b Implementing the performance consider individual and portfolio results in a graphical form:
Here is some graphical presentation for the securities of Astra Zeneca and Shell along
with their individual portfolio plotting:
5

2.c The productive boundary element of both the securities:
The productive boundary expresses the establishment of optimum portfolio that shows
the higher stage of return to the investor at certain stage of risk that they are prepared to attempt
the reduced stage of risk at the expected rate of return they become. In this stage it includes those
portfolios which are lying below the boundary which are not considered as optimal portfolios of
the company because investor does not get the expected return at the level of point. Here are
some graphs which shows the risk and return factor of Astra Zeneca and Shell along with the
company risk and return portfolio (Ng, 2018).
6
Risk
Return
High Risk
High Potential Return
Low Risk
Low Return

2.d Measurement of low variance portfolio also with the optimal weights at which outcomes will
be more:
Lower variance portfolio is method used in respect to decrease risk and higher return.
Also it is described that it can be used in respect to increase the return derived by the investor.
Here are some following equation which are used in order to measure the lower variance
portfolio,
Weight of X security = (SD y)2 – Co-variance x y / (SD of x)2 + (SD of y)2 – 2* Co-variance x
y
In a very first point, the weight of X is measured it will determine the performance of the Y
security. (1 – W x)
In the above following cases it shows about the two securities that is Shell and Astra Zeneca at
which optimal investment is successful as under:
The Optimum Weight for Astra Zeneca will be: -
= (13.12)2 – 11.78 / (4.26)2 + (13.12)2 – 2 * 11.78
= (172.13 – 11.78) / (18.15 + 172.13 – 23.56)
= 160.35 / 166.72
7
Individual Asset
Standard Deviation
Expected
Return
Risk free rate
Efficient Frontier
Portfolio

= 0.96
The investment in two securities which are ideally portfolio mix is 96% of the present value and
the remaining 4% of investment is successful in respect of the overall investment (Omura, Roca,
and Nakai, 2021).
The above securities are showing the calculation of standard deviation:
= (4.26)2 * (.96)2 + (13.12)2 * (.04)2 + 2 * .96 * .04 * 4.26 * 13.12 * .21
= (18.15 * .92) + (172.13 * .002) + .90
= .70 + .34 + .90
= 1.94%
In the case of both Shell and Astra Zeneca show that the value of standard deviation is 1.94%
2.e Recommended to the investor on choosing of the inventory and suggest them if the assets are
present to the investor:
The above measurement is based on the complete interpretation which has been show
that the investor need to invest its money in Shell if they want to get good outcomes. If an
investor invests their money in that firm for a long duration, then it will get goods results in
future. On the other hand, in case of Astra Zeneca market price is changed on a daily basis over a
certain period of time and then the exact return on investment can't be come out for a long-time
period. If an investor made their investment in those securities which provide sustainability and
consistency in returns to the investor and which arrived on monthly basis and covered in the
excel workbook. Basically it creates consistency in the report of Shell and Astra Zeneca it is also
changing over the specific period of 5 years. So, its suggestion to the investor to make the
investment on Shell Plc (Wang, Wu and Hao, 2020).
Part 2
1. Required rate of return
The concept of required rate of return show the less value of profit or return an investor
will be seeing or receiving the assumed risk of investing in an inventory or other type of security
also. In simple words the minimum requirement of return for the investor towards the invested
business is basically known as required rate of return (Wanna, Kelly, and Forster, 2020). There is
a formula for calculating the required rate of return:
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Required rate of return = Risk-free rate of return + Beta X (Market rate of return - Risk-free rate
of return)
 It Deduct the risk- free rate of return from the Market rate of return
 multiply the above beta security with the above figures.
 For identifying the required rate of return add the result for the risk-free rate.
Thus, the expected rate of return on each stock is:
Shell = .0225 + .1933(.08 - .0225) = 3.36%
Astra Zeneca= .0084 + .650(.05 - .0084) = 3.54%
The online sources of risk-free rate of return has been recorded also the beta & market rate of
return has been shown in Excel workbook.
The Beta for Shell is .1933 and the Astra Zeneca is showed as .650
2. Dividend discounted policy
The concept of dividend discounted model is quantitative technique basically is used for
forecasting the price of the firm's inventory related with the subjective theory. It shows the
current- day price is value the total of all its future dividend payments when discounted return to
their current worth (Yasmin, and Rashid, 2019). In other words, it helps to estimate the value of
the business stocks and it depends on that theory which shows that the current price is value the
overall of its future payments of dividend. Here is a formula to calculate the dividend discounted
model are as follows:
P = D1 / r – g
In which, P = Inventory price
D1 = amount of next year dividend
r = fixed cost of equity capital
g= fixed growth rate forever.
The dividend payment is successful by the Shell Ltd over the period of 5 years has been given
below:
2017 – 3.00p
2018 – 5.77p
2019 – 9.15p
2020 – 60.08p
2021 -10.90p
9

Growth rate of the Shell in payment of dividend has been 2.60 % in 2021
The expected dividend in 2022 are as:
= 10.92 + 2.60 %
= 11.20
The cost of Equity has been 3.36 % for the Shell that has been measured above. Therefore, the
amount of Shell limited by using dividend growth model are as follows:
= 13.01 / (3.36 % - 2.60 %)
= 17.12
The amount of Shell share has been £17.12 as per the dividend growth model.
3. Compare the market value with the above calculated value:
From the comparison of above calculation, it shown that the actual market value of the
Shell company is 272.00 and it express in above formulation of Shell with the help of Discount
dividend model that is 17.12 so, it clearly shows that this model is not efficient for the company
so, the suggestion for the Shell organization regarding that model is it’s not efficient for the firm
(Zhou and et.al., 2018).
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CONCLUSION
As it is concluded from the above report the accounts of financial management helpful to
present and applied the techniques which involves Mean, variance and standard deviation. This
report provides a guidance in selecting the stock which should be meaningful in the mind of
investor and would have to provide a better source of return to the investor so, it can invest their
money in the organization because every investor attracts toward the highest return. It also
assists to calculate which firm is having highest return and what are the risks included in the
procedure as well. It also gives suggestion after project and formulation as which firm has the
ability of creating higher returns in relation to other firms over a particular period of time. It
mainly assists to know the weight-age of portfolio and how their mean is shared among the
selected organisations. It creates changes in accounts which being observed and take decision
which are to be made for creating good performance and outputs. It is also helpful to knowing
the required rate of return and models which would best suitable in the demand and necessary for
the firm selection so far.
11

REFERENCES
Books and Journals
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finance for the emergence of technology-based firms in Jordan. Venture Capital. 20(2).
pp.137-157.
Alam, N., Gupta, L. and Zameni, A., 2019. Fintech and Islamic finance. sl: Springer
International Publishing.
Bruna, M.G. and Lahouel, B.B., 2022. CSR & financial performance: Facing methodological and
modeling issues commentary paper to the eponymous FRL article collection. Finance
Research Letters. 44. p.102036.
Dai, R. and et.al., 2021. Dissemination, publication, and impact of finance research: When
novelty meets conventionality. Columbia Business School Research Paper Forthcoming.
Darestani Farahani, A. and et.al., 2022. Introduction of New Risk Metric using Kernel Density
Estimation Via Linear Diffusion. Advances in Mathematical Finance and
Applications, 7(2).
Ermasova, N. and Mikesell, J.L., 2019. PUBLIC CAPITAL BUDGETING AND
MANAGEMENT: THE CONCEPT AND ITS APPLICATION IN THREE
IMPORTANT FEDERATIONS. Public Finance & Management, 19(3).
Glaum, M., Schmidt, P. and Schnürer, K., 2018. Processes and accuracy of cash flow
forecasting: A case study of a Multinational corporation. Journal of Applied Corporate
Finance. 30(2). pp.65-82.
Ng, A.W., 2018. From sustainability accounting to a green financing system: Institutional
legitimacy and market heterogeneity in a global financial centre. Journal of Cleaner
Production. 195. pp.585-592.
Omura, A., Roca, E. and Nakai, M., 2021. Does responsible investing pay during economic
downturns: Evidence from the COVID-19 pandemic. Finance Research Letters. 42.
p.101914.
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Wang, L.O., Wu, H. and Hao, Y., 2020. How does China's land finance affect its carbon
emissions? Structural Change and Economic Dynamics. 54. pp.267-281.
Wanna, J., Kelly, J. and Forster, J., 2020. Managing public expenditure in Australia. Routledge.
Withers, O. and Zoltani, T., 2020. Leveraging support for pangolin conservation and the
potential of innovative finance. In Pangolins (pp. 579-595). Academic Press.
Yasmin, A. and Rashid, A., 2019. On the mystery of financial conservatism: Insights from
Pakistan. Emerging Markets Finance and Trade. 55(12). pp.2904-2927.
Zhou, W. and et.al., 2018. What influence users’e-finance continuance intention? The
moderating role of trust. Industrial Management & Data Systems.
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