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Principals of Financial Markets

   

Added on  2020-04-01

20 Pages4108 Words119 Views
Principals of Financial Markets 1

Executive SummaryThe purpose of the report is to provide insight into the performance of telecom industryin Australia through using top down analysis. This report also provides specific informationabout the two major players of the telecom industry. The two companies that are selected for thispurpose are Telstra Corporation and TPG Telecom. Both these company has different level ofworkings in the industry. Telstra has performed better as compared to TPG Telecom in segmentlike liquidity of firm, market performance and profitability analysis but capital structure of TPGTelecom was much better than Telstra Corporation. 2

ContentsExecutive Summary.........................................................................................................................2Introduction......................................................................................................................................4Top Down analysis..........................................................................................................................4Australian Economic Environment..............................................................................................5Macro-economic environment of Telecommunication Sector of Australia.................................6Part B: Bottom up analysis of the companies selected under the same industry (Telstra and TPGTelecom)........................................................................................................................................10Profitability Ratio Analysis........................................................................................................14Liquidity Analysis......................................................................................................................15Capital Structure Ratio Analysis................................................................................................16Market Performance...................................................................................................................17Conclusion and Recommendations................................................................................................18References......................................................................................................................................193

IntroductionThe present report conducts a fundamental analysis of an industry for identifying thefactors that impacts the stock movement of the companies in the industry. The fundamentalanalysis mainly aims to predict the performance of an industry through examining its present andfuture investment strategies. This is done to predict the economical value of the stocks of acompany in the future context by analyzing its past and present performances. The investors of acompany can conduct a fundamental analysis through examining its financial statements,economic and technical environment. There are mainly two approaches used to carry outfundamental analysis of a company that are, bottom-up and top-down analysis. The top-downapproach consist of analyzing the macroeconomic factors impacting the stock performances suchas GDP, currency rates, trade balances inflation and interest rates for identifying the stocks thatare performing well. This is followed by selecting the companies that have efficient assetsallocation for releasing capital gains by top-down investors. On the other hand, bottom-upanalysis analyses the microeconomic factors that have an impact on the companies in which theyare seeking to invest (Bulkowski, 2012). In this context, the report undertakes a fundamentalanalysis of telecommunication industry of Australia. The top-down and bottom-up analysis oftwo ASX listed companies in the industry that are, Telstra Corporation and TPG Telecom hasbeen done in the report.Top Down analysisThe top-down approach in the fundamental analysis consists of analyzing the broadeconomic factors that tends to influence the share prices and at last selecting a specific companyfor investment purpose on the basis of the analysis. As such, this analysis is referred to as4

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