Investment Decisions Assignment
Added on 2020-05-04
27 Pages3949 Words83 Views
RUNNING HEAD: Investment decisions1Name of the student-Topic- Financial analysis of Rocky MountainUniversity name-
Investment decisions2Introduction With the increasing ramified economic changes and complex business structure, each andevery business organization is making effective business functioning to create value on itscapital. In this report, Rocky Mountain Dealerships Company has been taken into consideration.It is evaluated that financial analysis and identifying the stock market trend is the most valuabletool to evaluate all the ups and down of business. In the starting of this report, stock marketanalysis of Rocky Mountain Dealerships has been undertaken. After that, ratio analysis andperformance of Rocky Mountain Dealerships with its competitor company has been done. Inaddition to this, company’s investment viability and investors inclination towards the companyhas been evaluated in determined approach. It is considered that if investor wants to create valuein their investments then they should evaluate all the internal and external factors of the businessin which they want to invest their money.
Investment decisions3Present description of companyRocky Mountain Dealerships is an advisory company having its business on internationallevel. It is Canada’s largest agriculture equipment dealers that have been reporting its financialstatement on international level. It provides wide range of information to its stakeholders andcontains forward looking way of companies which may assist investors in their investmentdecisions. It has been observed that this company earns its revenue by providing financialservices to clients. The main rival of Rocky Mountain Dealerships is Schlumberger OilfieldServices Company which also provides financial services to its clients. This company is havingit’s headquarter in Houston, UK and operated by Paal Kibsagaard. This company has beenrunning its business on international level with a view to provide financial advisory services.Rocky Mountain Dealerships has leading position and covering 22% market share in providingfinancial services to its clients including domestic and international services. In addition to this,Schlumberger Oilfield Services Company has acquired 24% market share in UK in its financialservices. The vision of Schlumberger Oilfield Services Company is to increase its investor’svalue by providing effective investment advice. These both companies are indulged in providingbest quality of services to its clients on domestic and international level. Purpose of this reportThe main purpose of this report is to identify the viability of the investment in Rocky MountainDealerships and identify whether investment in this company would bring value creation on the
Investment decisions4invested capital. It is considered that if investors want to create value on their investment thenshare price analysis, ratio analysis and capital budgeting tools will be helpful for the investors. Brief summary of stock market activities of Rocky Mountain DealershipsRocky Mountain Dealerships has increased its share price by 20% as compared to lastseven year data. It has been observed that there are several highly rival companies that have beenoffering innovative financial services to its clients. It is observed that company has been facinghigh fluctuation in its share price. In 2010, Rocky Mountain Dealerships was having $ 6.91 shareprice which continuously increasing till 2014 after that company had to face high decline in itsshare price and had $ 5.35 share price in 2015 after that again the share price of Rocky MountainDealerships increased to $ 7.96 in 2017. It has shown that company has been running its businessin sluggish market condition that has put high impact on the share price fluctuation throughoutthe time. Year Shareprice20106.91555320117.60565683320128.46771816720139.74096058320148.637661833
Investment decisions520155.35222120165.48027616720177.962296333On the other hand its rival Schlumberger Oilfield Services Company has high increment in itsshare price and increased its share prices by very drastic amount. It has observed thatSchlumberger Oilfield Services Company has increased its share price throughout the time andwithin seven years it has doubled its share price. In 2017 company had $10.5 share prices whichwas as compared to its 2010 data is very high. Year Shareprice20105.520115.420126.720138.220148.620159.5201610201710.5Stock market activities These levels of changes in the share price of Rocky Mountain Dealership reflect that NASDAQshare market has high fluctuation in its market capitalization. However, Rocky Mountain
Investment decisions6Dealership has beta of .40 which reflects that company would be less affected by the changes inthe share price of NASDAQ at large. Nature of the risk in environmentIt is evaluated that company had faced various risk in its US business. It is observed thatcompany had faced various problems and issues due to sluggish market condition. The risk ofUS market could be described as systematic risk and can be countered through BETA ofcompany (Brigham and Ehrhardt, 2013). It has observed that Rocky Mountain Dealership ishaving beta of 0.40336 which reflects that if market is changed by one factor then share price ofRocky Mountain Dealership will be fluctuated in the same direction by .40. However, this is thepositive beta which reflects that company has low level of fluctuation in its business andprovides low level of changes with the movement of sluggish market condition. This divulgesthat investors could invest their money on long term basis with the hope of high value creationon their investment value (Flannery, 2016).Ratio analysis and comparison of Rocky Mountain Dealership with SchlumbergerOilfield Services CompanyThis has shown that ratio analysis of Rocky Mountain Dealership will be used to evaluate thefinancial performance of company and establish the relation between two important factors. Current ratioThis ratio divulges company’s ability to pay off its short term and long term debts through itscurrent assets. It is observed that Rocky Mountain has maintained 1.42 current ratio which is .17
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