Assignment on Principals of Financial Markets
Added on 2020-04-07
19 Pages3714 Words33 Views
Principals of Financial Markets 1
Executive SummaryAnalysis of industry performance is always the major concern as there is no particularinformation available at one place. Industry analysis can be better conducted through top downand bottom up analysis. In this report top down and bottom up analysis has been conducted ofretail industry of Australia. 2
ContentsExecutive Summary.........................................................................................................................2Introduction......................................................................................................................................4Top-Down Analysis.........................................................................................................................4Australian Macro-Economic Environment..................................................................................4Bottom up Analysis of the Retail Industry (Wesfarmers and Woolworth).....................................8Detail Analysis of ratio calculation of both the companies...........................................................14Liquidity or Solvency Analysis..................................................................................................14Capital Structure Analysis.........................................................................................................15Profitability analysis..................................................................................................................16Market Performance analysis.....................................................................................................17Conclusion and Recommendation.................................................................................................17References......................................................................................................................................193
IntroductionThe technique of fundamental analysis proves to be highly essential for investors indetermining the intrinsic stock value of different business entities. This helps them to makeaccurate decisions regarding their investment in particular stocks of companies. This report hasbeen developed for carrying out fundamental analysis of an Australian industry with theselection of two ASX listed companies operating within the same industry. The fundamentalanalysis is carried out through conducting top-down and bottom-up analysis of the selectedindustry. The industry selected for the purpose is retail industry of Australia with the selection ofWesfarmers and Woolworths as the major companies operating within the sector. Thefundamental analysis is conducted for evaluating the factors that influences the share price of thecompanies operating within the retail industry of Australia. The factors analysis consists ofevaluating the micro and macroeconomic characteristics impacting the performance of theindustry and the selected ASX listed firms within the sector. Top-Down AnalysisThe top-down approach under fundamental analysis consists of analyzing primarily themacro-economic trends in a selected market. This involves a general evaluation of the macro-economic factors such as Gross Domestic Product (GDP), interest rate, rate of inflation, foreignexchange rate and trade movements of a selected economy. This is followed by predicting theperformance of an industry on the basis of macro-economic evaluation. The industry that willprovide larger returns in the existing macro-economic environment is selected through the use oftop-down analysis. At last, the top-down investors analyses the company’s performance withinselected industry for adding their stock to their portfolios. The companies are selected ion the4
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