Financial Performance and Share Price: A Business Report (Semester 1)

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BUSN20019: PROFESSIONAL PROJECT
Impact of the financial performance of the firm on its share price
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Contents
Introduction......................................................................................................................................3
Critical literature review..................................................................................................................4
Research aims and research objectives............................................................................................6
Research questions...........................................................................................................................6
Research plan...................................................................................................................................7
Data collection and data analysis method....................................................................................7
Project feasibility within the timeframe..........................................................................................8
Gantt chart.......................................................................................................................................8
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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Introduction
The aim of this report is to analyses the financial performance of the organization's impact on its
share price. The report will begin with the critical literature review of this subject matter in
which the discussion will be made regarding the financial performance, share price, relationship
that net profit and share price of the firm have and impact of financial performance on the share
price of the company. Based on the research objectives, research questions will be developed and
the whole research will be conducted accordingly. It will also discuss the proposed method of
research that will be adopted for data collection and data analysis. The feasibility of the project
will be analyzed and a Gantt chart will be made. In the end, the conclusion of the project will be
provided.
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Critical literature review
Financial performance
According to Sami RM Musallam, 2018 it is the subjective measure through which the analysis
is made regarding the use of assets from the primary mode of generating revenue and business. it
is also used for measuring the complete financial health of the company over the given period.
Investors and analyst use financial performance for comparing the similar firms across the same
sector industries or the other sector industries (Sami RM Musallam, 2018). The aggregate of the
various measures is made for measuring the financial performance including operating income,
cash flow operations, revenue from operations, and selling of units.
Share price
Malkina, & Yakovleva, 2019 is of the view that share price refers to the price of the single share
out of the company’s saleable stocks. It is the highest amount that an individual is willing to
paying for the stock of the company or the amount that is the lowest for which it can be bought
for. The share price of the company reflects the financial performance of the company. The share
price of the company can be used for generating cash by the issuers, third parties or investors.
The reputation of the company is affected by the share price of the company. The strong
performance of the share price plays a vital role in retaining, recruiting, and motivating
employees and collapse in the company’s share price can lead to the company’s poor reputation
(Malkina, & Yakovleva, 2019).
Impact of financial performance
As per the view of Liu , et. al, 2019 that the financial performance of the company is visible from
the company's fundamental structure. The share price of the company will increase in the future
if the company is having better fundamentals. The typical analysis is made by the investors
regarding the company’s financial statement analysis and assessment. Financial ratios of the
company are monitored for looking towards financial performance (Liu, et. al, 2019). Either it
will be good or bad which will impact the stock price of the company directly. Profit earnings
ratio of the company significantly determines the company’s stock market price.
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The share price of the company reflects its financial performance. Every year the stakeholders of
the company are informed with its financial performance in its annual reports. The
summarization is made by the annual reports about all the non-financial and financial activities
of the company so that the informed decision can be made by the users. The disclosure is made
in the annual reports about the quantitative figures of the firm’s performance including a net
profit, assets, expenses, liabilities, earnings per share, equity value, dividend amount, revenue
and performance (Zakia, et. al, 2019). There is a great impact of the financial performance and
company's dividend declaration on its stock price because of dividend declaration, the
announcement of EPS impact on the stock price for the relatively 5 year period that is considered
as the short-period.
Nuţă, & Nuţă is of the view that if the company will have strong financial position and high net
profits then its share price will increase which will attract the investors to purchase the
company's share increasing revenue generation of the company. While if there will be low
financial performance it will affect the share price due to which the investors will not like to
invest the company's share. It will affect the company's financial position to a great extent ( Nuţă,
& Nuţă, 2012).
According to Transchel, 2017 the demand and supply of share price affect its price that shows
that the payment will be made by investors that promise for the future earnings and growth.
Stock-price’ s market perception is reflected in the PE ratio of the company which is share price
of the stock divided by EPS. Increased profit result in increasing the stock price and the investors
feel confident about the future of the company and there is an increase in the demand for the
stock (Transchel, 2017). The stock price can also increase through dividend issuance and
buyback of stock. The market perceptions regarding the stock price are affected and changed
through the earnings affecting the company’s investors’ confidence. Before the releasing of the
annual report the analyst of the stock market issue the estimate they believe about the earnings of
a company that has been calculated by them on the guidance basis, management performance,
conditions of the market, and other metrics and models which help in forecasting the
performance of the company.
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If the earnings of the company are more than the estimate made by the analyst, then the share
price jumps. If the earnings of the company fail to meet the earnings estimation then it
significantly affects the stock price resulting in stock price fall due to which the confidence level
of investors also falls.
Literature review conclusion
Hence, from the above literature review, it can be concluded that there is a great impact on the
financial performance of the company on its share price. The annual reports of the company
depict about the annual profits, earnings and overall financial position of the company and this
report is prepared for the stakeholders of the company so that they can decide on the investment.
If the financial performance of the company is good then it positively affects the share price of
the company rising the investors’ confidence towards the company. Otherwise, if the earnings
are below the estimated earnings made by the analyst then it negatively influences the company’s
share price resulting in failing the company’s investors’ confidence (Lilienfeld & Ruenzi, 2014).
Research aims and research objectives
The main aim of this project report is “to analyses the impact of the financial performance of
the company on its share price.”
For the research aim’s achievement, the following research objectives are as follows-
 To measure the net profit of the company
 To analyze the relationship between net profit and share price of the company
 To conduct the literature review so that the gain can be achieved regarding it.
Research questions
To achieve the research aims and objectives, research questions have been established-
 Primary question
Does the financial performance of the company have any impact on its share price? Secondary question
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Does any correlation exist between net profits and share price of the company?
Research plan
Data collection and data analysis method
Research methodology refers to the process which is used for collecting the data and information
so that the business decisions can be made. Various methods are included in the research
methodology including surveys, publication research, interviews. All the relevant sources are
used for data collection so that research questions and problems can be answered. It can be
divided into two methods including secondary data collection method and primary data
collection method (Breuer, et. al, 2017).
For conducting this research the secondary method of data collection will be used. Secondary
method refers to the data type that has been published in the newspaper, books, journals,
magazines, and online portals already. Good amount of the data can be made available through
these sources. Very less time is required for collecting such type of data.
The Walmart Company has been chosen for this research study and the data regarding the two
variables of the company will be collected by using its official website.
http://www.annualreports.com/HostedData/AnnualReportArchive/w/NYSE_WMT_2017.pdf
(Net income- page-36). The share price of the company will be collected from
https://finance.yahoo.com/quote/WMT/history?
period1=1483209000&period2=1514745000&interval=1d&filter=history&frequency=1d link of
the company. The additional documents of the company will also be studied for this research
(Lo, et. al, 2012).
After the gathering of data, data will be analyzed by the adoption of various data analysis method
including regression analysis, correlation, and ANOVA test. All the calculations will be made in
MS-Excel.
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Project feasibility within the timeframe
Feasibility of the project is significant to be evaluated as it helps in determining the project
viability if it is legal and technically feasible along with its economic feasibility. This project is
completely feasible as this project will be completed within the particular timeframe. The time
frame for this project will be one and half month starting from the august beginning with the
project proposal activity and it will end in mid of September with the submission of the report
(De & Suprawan, 2012).
Activities Start Data End Date Duration
Project Proposal 01/08/2019 05/08/2019 5 Days
Conceptual
framework
06/08/2019 11/08/2019 6 Days
Literature review 12/08/2019 18/08/2019 7 Days
Research plan 19/08/2019 24/08/2019 6 days
Research aims 25/08/2019 31/08/2019 7 Days
Data collection 01/09/2019 07/09/2019 7 Days
Analysis of data 08/09/2019 11/09/2019 4 Days
Report submission 12/09/2019 15/09/2019 4 Days
Gantt chart
It is the bar chart types which help in project schedule illustration. All the tasks and activities that
will be performed will be listed in the Gantt chart on the vertical axis and corresponding
activity’s time intervals will be shown on the horizontal axis. Each activity’s duration will be
shown in the graph by the horizontal bars’ width. The Gantt chart for this research is shown
below which started in August month and will be ended in September.
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Conclusion
From the business report, it can be concluded that the financial performance of the company is
significantly needed to measure as it has a great influence on the company’s share price. The
share price of the company affect the reputation of the company and the company with the good
share price and reputation easily gets attracted by the center point of investors and high amount
of investment is made by them. The share price and net profits of the company are correlated
with each other. The literature review was conducted by studying the reviews of various authors
and it was found that both the variables impact each other and the financial performance of the
company is the great element of the company. The secondary research methods have been
chosen for conducting the research. Walmart‘s official website will be used and from there the
data of the two variables will be collected of the past ten years to answer the research questions.
After the data collection, correlation, regression analysis will be conducted for the data analysis
along with the ANOVA test.
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References
 Breuer, W., Felde, M., & Steininger, B. (2017). The Financial Impact of Firm
Withdrawals from "State Sponsor of Terrorism" Countries. Journal of Business
Ethics, 144(3), 533-547. DOI: 10.1007/s10551-015-2814-y
 De Bussy, & Suprawan. (2012). Most valuable stakeholders: The impact of employee
orientation on corporate financial performance. Public Relations Review, 38(2), 280-287.
DOI: 10.1016/j.pubrev.2011.11.006
 Lilienfeld-Toal, U., & Ruenzi, S. (2014). CEO Ownership, Stock Market Performance,
and Managerial Discretion. 69(3), 1013-1050. https://onlinelibrary-wiley-
com.ezproxy.cqu.edu.au/doi/full/10.1111/jofi.12139
 Liu, Z., Ding, Z., Lv, T., Wu, J., & Qiang, S. (2019). Financial factors affecting oil price
change and oil-stock interactions: A review and future perspectives. Natural
Hazards, 95(1), 207-225. DOI: 10.1007/s11069-018-3473-y
 Lo, Yeung, & Cheng. (2011). The impact of environmental management systems on
financial performance in the fashion and textiles industries. International Journal of
Production Economics, 135(2), 561-567. DOI: 10.1016/j.ijpe.2011.05.010
 Malkina, M., & Yakovleva, E. (2019). An econometric analysis of factors affecting the
stock price of Russian companies. Finance and Credit,25(4), 912-924. DOI:
http://dx.doi.org/10.24891/fc.25.4.912
 Nuţă, F., & Nuţă, Alina Christina. (2012). The impact of financial performance upon the
social responsibility of Romanian SMEs point of view. Acta Universitatis Danubius /
Oeconomica, 8(4), 25-31. http://journals.univ-danubius.ro/index.php/oeconomica/index
 Sami RM Musallam. (2018). Exploring the Relationship between Financial Ratios and
Market Stock Returns. Eurasian Journal of Business and Economics, 11(21), 101-116.
DOI: 10.17015/ejbe.2018.021.06
 Transchel, S. (2017). Inventory management under price-based and stockout-based
substitution. European Journal of Operational Research, 262(3), 996-1008. DOI:
10.1016/j.ejor.2017.03.075
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 Zakia Maulida Antono, Adam Amril Jaharadak, & Abdul Ali Khatibi. (2019). Analysis of
factors affecting stock prices in mining sector: Evidence from Indonesia Stock
Exchange. Management Science Letters, 9(10), 1701-1710. DOI:
10.5267/j.msl.2019.5.018
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