Principles of Financial Markets
Added on 2019-11-20
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Running head: PRINCIPLES OF FINANCIAL MARKETSPrinciples of financial marketsStudent Name:University Name:Author Note
2PRINCIPLES OF FINANCIAL MARKETSExecutive SummaryThe current study elucidates illustratively about the financial markets in Australia and takesinto consideration the operations of two corporations Westpac and Commonwealth Bank.This report elaborately discusses the mission statement of both the firms along with thebackground and operations of the firms. This study also presents a fundamental analysismainly founded on both top down as well as bottom up analysis approach of both thecorporations. Essentially, a top down evaluation on the basis of nation’s inflation, rate ofgrowth of gross domestic product, unemployment level of the Australian economy is herebypresented in this study. Furthermore, elaborate analysis using bottom up evaluation on thebasis of key financial ratio of both corporations is hereby presented in this current study.Founded on the overall analysis, appropriate suggestions are also provided at the end.
3PRINCIPLES OF FINANCIAL MARKETSTable of ContentsIntroduction................................................................................................................................3Background of Banking industry of Australia...........................................................................3Mission Statement......................................................................................................................4Top down analysis......................................................................................................................4Bottom up analysis.....................................................................................................................8Summary and Recommendations.............................................................................................14References................................................................................................................................15
4PRINCIPLES OF FINANCIAL MARKETSIntroductionIn today’s world, it is of utmost importance to carry out appropriate evaluation of theoperations of the corporation along with the industry in which the company operates.Fundamentally, the analysis can be carried out with the assistance of the top down as well asbottom process of analysis. It can be hereby mentioned that the top down analysis assistfinanciers by preparing and presenting a macro view of the overall condition of the economyand the industry. Again, conversely, bottom up approach reflects a micro economic pictureof the respective business entity under consideration. Essentially, this current study can aid inthe process of conducting a fundamental evaluation of the two corporations that isCommonwealth Bank and the Westpac, both listed in the Australian Stock Exchange (ASX).Basically, this can be undertaken founded on the top down as well as bottom up analysis ofboth the business entities. The study also presents apposite recommendations to the financiersor the sponsors on the basis of the results obtained. Background of Banking industry of AustraliaThe banking industry can be regarded to be in a state of instability. Essentially, six differentforces are said to shape the banking sector in Australia that include altering demographics,technology, behaviour of consumers in the market, government and the subdued worldeconomy. The Banking Act declared during 1959 assisted Australia in the process ofenhancement of banking industry. Different licensed banks are operating under the bankingsector and there is a stable growth in the overall performance of banks in the industry. This inturn assisted in the growth of the economy on the whole of the nation. Essentially, theconstancy of the banking sector is essentially maintained by the enhancement of the capital inthe current quarters. Again, the other important steps that can be taken up by the bankingsector of Australia include concentrating on the ratio on Liquidity Coverage (PwC 2017).
5PRINCIPLES OF FINANCIAL MARKETSPetty et al. (2015) asserts that analysis of financial stability of Australia claims thatsignificance can be attached to the performance of the asset of diverse banks operating inAustralia. During the financial year 2016, the banking sector assumed a major step ofcreating business loans and the extreme competitive environment and significant decisionshelped in the process of the analysis of the overall growth as well as development of differentparts of the nation. Evaluation of the movement of the banking segment in Australiaessentially involves analytical evaluation of specifically the commercial property valuation.Fundamentally, free market of Australia also aided in acquiring the present position of anddevelopment of banking industry also takes account the importance of existence of banks andsecuritization. Again, the growth is essentially based on the decrease in the occurrence ofdifferent credit unions, finance corporations and building specific societies (Linkov et al.2014). Mission Statement The mission statement of the two listed Australian banks (Commonwealth Banks andWestpac) is hereby mentioned below:The mission of the corporation Commonwealth Banks is to augment the overall wealth aswell as fulfilment of life of the customers of the bank. The management of the firm wants tohelp customers to derive more out of their life. However, to this specific end, management ofthe bank essentially follows a particular strategy of forward thinking, adopts stratagem ofinnovative as well as dependable practices, maintains compliance to appropriate principles ofbanking that includes capitalization, diversifies liquidity risk. In addition to this, conservativepolicies of lending, investment in different channels of service delivery and maintainsorientation to customer experience (Cbagroup.com 2017).
6PRINCIPLES OF FINANCIAL MARKETSThe mission of the business entity Westpac is to assist customers across the world to developand prosper. Essentially, they also want to present offer adequate service to differentcustomers and assist them in the process of growth. The mission of the bank is also to deliverhigher rate of return to all the customers, business professional as well as all othershareholders of the corporation. In addition to this, management of this bank also want theassociation with the customers to be very strong and at the same time reliable. Furthermore,Westpac also wants to create a positive working environment and make it the best place forall the employees of the corporation. Management of the corporation also intend to thrive onthe style of leadership and introduce an organization that is efficient in developing long termassociations (Westpac.com.au 2016). Top down analysisAs rightly put forward by Ledgerwood et al. (2013), top down analysis can be carried out byusing the Economic, Industry in addition to Company (EIC) tactic. Leary and Roberts (2014)assert that analysis of the industry is considered first in case of undertaking top downanalysis. In the current condition of the Australian market that is necessarily growing, GDPgrowth can be considered to be significant. Essentially, this can be necessarily founded on thepresent rate of growth of the gross domestic product that is 4.40%.
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