Finance for Business: Understanding the Australian Financial Market

This report explores financing for business operations and the importance of the Australian financial market. It compares three essential types of Australian businesses and analyzes five basic principles of finance. It also delves into the trading on ASX and the role of ASIC as a financial market regulator.

Finance for
Business

INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................2
PART 1............................................................................................................................................2
1.1 Compare three essential types of Australian Business..........................................................2
1.2 Analysis of five basic principles of finance...........................................................................3
PART 2............................................................................................................................................4
2.1 Fact finding of the trading on ASX.......................................................................................4
2.2 Fact finding of financial market regulator in Australia.........................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
1

INTRODUCTION
Financing for business is the process of increasing money for business operations, buying
things, or making investments (Connolly and Bank, 2020). Financial institutions,
like commercial banks, are committed to providing liquidity to enterprises, customers and
investors to support them meet their aims. Financial markets usually refer to every market in
which shares are traded, along with the share market, the credit markets, the foreign exchange
market and the derivatives market and among many others. Financial markets become essential
for smooth functioning of capitalist systems. For the better understanding of this concept, this
report selects different Australian companies. This concept helps the Australian organization to
understand the importance of financial market and how it works. This assessment covers several
topics such as research and fact finding on Australian financial market and fact finding of
financial market trading practices and regulation in Australia.
MAIN BODY
PART 1
1.1 Compare three essential types of Australian Business
Basis BHP Group Wesfarmers Limited Woolworths Supermarkets
Owner Phillip Charly Walter Harper Woolworth
Level of difficulty High High High
Life the business Dual listed public
listed
Public Limited Limited liability
Liabilities of owners Limited liabilities Limited liabilities Limited liabilities
Legal status of business Company Conglomerate
Company
Subsidiary company
Level of difficulty in
mobilizing funds
Low Medium Medium
Level of difficulty in
business transfer
Medium Medium Medium
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1.2 Analysis of five basic principles of finance
There are some basic principles of finance which are related to the current scenario of the
organizations which are as follow:
Principle of cash flow: "The Dow Jones Industrial Average was struggling to a slim rise,
although the S&P 500 and nasdaq fell back into negative growth because after washington post
said that the US-China trade negotiations run into difficulties over the production of food
products. The Dow DJIA, +0.33 per cent, increased by 24 points or 0.1 per cent to 27.716, whiles
the S&P 500 SPX, +0.07 per cent, decreased by 0.1 per cent to 3.089. The Nasdaq Composite
COMP,-0.05 percent, was down from 0.3 percent to 8.464 percent. According to the paper, while
President Trump agreed to purchase US$ 50 billion a year of soya beans, pork as well as other
agricultural goods, China is afraid of making a quantitative pledge in the text of the agreement.
Principle of diversity: Delta Air Lines (DAL) would be in a much better position than most
of its peers then it does not work particularly well for carrier to have lost nearly $ 6 billion in the
April-June quarter, against us since 2008 (Kraemer-Eis and et.al., 2019). Maybe more troubling
is Delta's perspective for the long term as the re-emergence of coronavirus hits demand
afterwards in many US states. The airline had intended to add 1,000 flights per day to its August
timetable, but now only 500 will be added.
Principle of Hedging: The largest US banks are completely disregarding billions of dollars
to cope with toxic loans as government assistance falls in the coming months, a sign most of the
worst financial harm from the disease outbreak is yet to come. JPMorgan Chase (JPM),
Citigroup (C) and Wells Fargo (WFC) said Tuesday that they had committed nearly $28 billion
to cover losses incurred last quarter, trying to wipe out a huge amount of profits made among
April and June. JPMorgan, the biggest US bank, identified a 51% decline in second quarter
profit, going to cite the need to start preparing for "uncertainty in the predicted increase." Wells
Fargo revealed its first quarterly loss since before the Great Recession.
Principle of time value of money: Time value of money (TVM) is the idea that income
they have now and it worth more than same amount in the future due to its potential earning
power (Fairchild and Hahn, 2020). The central concept of financing is that the money provided
will gain interest, every sum of money is valued more the faster it is earned. In the current
situation of this pandemic, market situation is very bad and individual unable to get that return
which they used to it.
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Principle of risk and reward: In this principle of finance, an individual get higher reward if
they have ability to take high risk. As per the current situation of world, there is no investor who
is ready to take risk if they do not get any additional rewards. For example: Share markets also
faces huge decline due to lack of flow of cash and spending power of individual almost finished
because of this pandemic situation. Currently investors not are in the position of taking any risk
due to financial loss which they already suffered because of lockdown situation.
PART 2
2.1 Fact finding of the trading on ASX
Identify 5 types of information the public companies provide:
 Sales of company’s shares
 Change of Director’s interest
 Information regarding Corporate Governance Statement
 Notice for General Meeting
 Proxy Results for Scheme Meetings and General Meeting
Dividend released by the public companies listed on ASX:
 Ex-dividend date: It is one working day before firm's record date. In order to qualify for
a dividend, the investor must have acquired the stock even before ex-dividend date. If
they buy shares on or after this date, the prior owner of the shares is eligible to the
dividends. The share price of a business will rise as the ex-dividend date approaches and
then decline after the ex-dividend date.
 Record date: Company Record Date at 5.00 p.m. mostly on date over which the business
closes its stock register to decide which investors are eligible to receive the latest
dividend (Ortiz and Muniesa, 2018). It is also the date on which all adjustments to the
registration information have to be finalised.
 Date payable: It is the date upon which dividend of the corporation is charged to the
shareholders.
 Dividend franking: Franked dividends have a franking credit connected to them that also
reflects the amount of income tax already paid by the company. Franking credits are
often referred to as imputation credits.
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 Type of dividends: The following forms of dividend types occur with the firm. Such as
dividend in cash, dividend of stock, dividend of land and script dividend.
Name 7 types of trading reports listed in ASX 24 Reports:
 End of day market summary: In this report, end of the summary included regarding
each trade and the trading venues (ASX 24 Reports, 2020).
 Daily non-NTP report: ASX Futures daily trading study for both Sydney and New
Zealand including five days of rolling history on the prior period trading day (Sauer and
Wiesemeyer, 2018). The information is compiled daily at about 7:30 a.m. based on the
Sydney time zone.
 Monthly trading statistics: The following are the initial reports and the statistics given
are updated with the latest information that was available of generating reports. it also
include the traded and non-traded volume.
 Monthly traded EFP and BTF volume: The Exchange of Futures for Physical (EFP) is
an alternative method used to price actual crude oil and another one is Block Traded
Facility (BTF). ASX 24 reports maintain monthly basis volume records of EFP and BFT.
 Historic price volatile data: It is a measurable statistic of the distribution of returns for a
specific security or market index over a specified period of time. Usually, this calculation
is determined by calculating the acceptable range from the average cost of the financial
asset for a stated amount of time.
 Record Volume: In this report, ASX record the on-market, off-market and non-traded
volume for both Sydney and New Zeeland.
 Annual volume: All the traded and non-traded volume data recorded in this annual
record for the final results.
Identify how many types of calculators available on ASX website for the usage of investors
and practitioners:
 ASX bond calculator: This calculator is being used to measure bond prices and yields
for Australian Government Bonds (AGBs) and other regular fixed interest bonds.
 Interest rate futures and options calculators: This is used to calculate the futures and
options of ASX shares for the investors and participants. It also includes the New
Zeeland products calculator.
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 Warrants calculators: It is used to measure the Equity Call Warrants, determine the
estimated fair value of the Equity Warrants, in which the stock charges a dividend
throughout the existence of the Warrant. Binomial model used only to value American
and European types warrants (Schoenmaker and Schramade, 2018). However, this model
will not provide anyone with a thorough study of the coefficients of responsiveness.
 Listing fee calculator: It is built to provide users with a guideline to the ASX Equity
Listing Fees that exist from as of 1 January 2018.
 SMSF calculators: This calculator includes the three different types of calculations such
as retirement, index chart and assets class calculation. .
Some questions individual should ask your broker before they start trading:
 What's my style of investing?
 What kind of financial manager do I need?
 Is this person a reputable fiduciary?
 What are his or her certifications?
 How is my advisor going to get paid?
 Is this person acting professionally?
 Am I receiving full and fair disclosure of all important facts?
 Am I working with the right type of advisor?
 Do I have an exit strategy?
 Am I learning?
2.2 Fact finding of financial market regulator in Australia
Role of ASIC: The role of ASIC is to encourage transparent and reasonable capital
markets, characterised by honesty and professionalism, and to encourage confident and engaged
involvement by customers and investment users (Role of ASIC, 2020). An ASIC issue financial
licences and regulates financial services firms to ensure that they work effectively, honestly and
reasonably through the Australian financial services licencing scheme.
Who regulate ASIC: The Australian Securities and Investments Commission (ASIC) is an
autonomous agency of the Australian Government to serve as the national corporate regulator
(Shaxson, 2018). The ASIC agencies that regulate this are the National Companies and
Securities Commission and the Offices of Corporate Affairs in the States and Territories. The
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Executive Committee of the ASIC is James Shipton and the Minister responsible is Josh
Frydenberg.
Powers of ASIC: ASIC has the authority or power to prosecute infringements and to
launch civil or criminal action under such Acts. This involves litigation against directors,
corporations or other individuals involved in issues such as breach of duty, misapplication and
bankrupt trading.
What kind of license you would advise them to apply: Firstly recommend the credit
licence and it has several steps which are mentioned below:
 Step-1: Identify that, whether your business involves in any credit activities
 Step-2: Familiar yourself with the licencing process
 Step-3: Collect all supporting documents which required with the application form
 Step-4: Must include qualification and work experience with application
 Step-5: Think about that, who will be the authorised as credit representative
 Step-6: Provide up-to-date information
 Step-7: Calculate licence fee
 Step-8: Understand your professional indemnity insurance obligations
 Step-9: Understand their obligations as a licensee
Explain book up practice in Australia: This study deals with a few issues that customers
have with the use of "Book up" method, please. "Book up" and "book down" are the words used
in the form of "Book up" Store credits that are popular in rural and remote Australia (Triantis,
2018). "Book up" (or "book down") involves a broker providing small quantities of short-term
loans to individuals. Traditional traders are restaurants, taxi drivers, street vendors and regional
airports.
CONCLUSION
From the above discussion it has been concluded that financial resources is essential for the
organizations to perform their operational activities. This report based on the facts and findings
of Australian financial market which includes the principles of finance that helps in managing
monetary resources. In addition, there are some findings based in the trading on ASX and how
ASIC regulates in the financial market. Public listed organization provides several types of
information on their websites regarding any information or modification in their business and
that is essential to know by others who are interest in it.
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8

REFERENCES
Books & Journals
Connolly, E. and Bank, J., 2020. Access to small business finance. RBA Bulletin, September,
viewed, 10.
Fairchild, C. and Hahn, W., 2020. Accounting and finance majors outperform other majors on
the major field test in business and the Comprehensive Business Exam: An analysis of
exam performance drivers. Journal of Education for Business, 95(6), pp.345-350.
Kraemer-Eis, H. and et.al., 2019. European Small Business Finance Outlook: December
2019 (No. 2019/61). EIF working paper.
Ortiz, H. and Muniesa, F., 2018. Business schools, the anxiety of finance, and the order of the
‘middle tier’. Journal of Cultural Economy, 11(1), pp.1-19.
Sauer, R. M. and Wiesemeyer, K. H., 2018. Entrepreneurship and gender: differential access to
finance and divergent business value. Oxford Review of Economic Policy, 34(4), pp.584-
596.
Schoenmaker, D. and Schramade, W., 2018. Principles of Sustainable Finance. Oxford
University Press.
Shaxson, N., 2018. The finance curse: How global finance is making us all poorer. Random
House.
Triantis, J. E., 2018. Project Finance for Business Development. John Wiley & Sons.
Online
ASX 24 Reports. 2020. [Online]. Available Through:
< https://www.asx.com.au/prices/daily_monthly_reports.htm >
Role of ASIC. 2020. [Online]. Available Through:
<http://www.cleanenergyregulator.gov.au/Infohub/Markets/Supporting-market-
integrity/The-role-of-the-Australian-Securities-and-Investment-Commission#:~:text=The
%20Australian%20Securities%20and%20Investments,financial%20services%20and
%20credit%20services>
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