Research Topics: Investment Banking

Sample Essay Investment Appraisal Techniques and their Associated Risks

III. Investment Appraisal Techniques and their Associated Risks Return on Equity (ROE) is a business ratio that measures the return the firm is earning on equity funds invested by its shareholders (Macmenamin, 1999, p. 304).  It is calculated by dividing the net profit with average common equity of the firm or in symbol: Net Profit/ Average Common Equity (as cited in Investopedia, 2003).  According to the preceding literature, ROE guides investors to build an equity portfolio whose components are able to derive profits efficiently.  Therefore, they can obtain optimal returns in the form of dividends though minimum investments.  An annual rising of ROE shows that the firm is valuing as well rewarding investments because it is sacrificing to avoid waste-saving in every organizational function but still maintain effectiveness to generate income.  In effect, shareholders have more financial residual to manage its portfolio with flexibility without damaging its individual investments.               Internal Rate of Return (IR) is a discount rate equivalent to investment project’s expected rate of return (Macmenamin 1999 p. 371).  Its calculation is far more complicated than ROE as it attempts to bring to zero the net present value of the cost of capital coming from the investors (cited in ACCAD Global, 2000).  As a result, shareholders can have understanding on whether to invest or otherwise to a certain project because they can compare the expected rate of return to what they viewed as required rate of return.  As observed, unlike ROE, IR merely measures projects cash flows not the whole business especially those who are under going-concern stance.  This is due to the ever-changing discount rates in which IR will be based and used to arrive at a decision.  However, IR is still effective when evaluating the profitability of two projects with single discount rate, predictable cash flows, equal risk and shorter time horizons (Investopedia, 2006).               One advantage of ROE is that it can evaluate a number of firms within an industry (as cited in Investopedia, 2003).  For example, between 1998 and 2003, Dell, HP and gateway have ROE of 46%, 12% and 2.5% respectively.  In terms of profit efficiency, investors can easily discern that Dell is an ideal investment and ROE mimics the cost-effectiveness and value of its direct marketing.  It is also a good indicator of growth potential.  However, ROE can be easily manipulated by a firm who wanted to make their reports attractive to prospective investors.  Through write-downs and/ or buyback programs, the net income in the numerator and equity on the denominator is distorted to result in a high Roes.  Further, even if manipulation is not applied, an ethically-prepared report can have unintended impression by providing high Roes that is caused by excessive debts (as cited in Investopedia, 2003).                 Ire’s capability to analyze cash flows stems one of its strength which is to compare cost streams between two projects (Martin, 1998).  It is a tool to screen individual projects and their profitability in which ROE lacks as the latter is holistic in its financial analysis.  However, aside from its historic position being an underdog to NP, IR is ineffective in calculating a project with a mixture of multiple positive and negative cash flows because there can be at least two solutions due to the effects of market factors (Investopedia, 2006).  Another bottleneck is the determination of well-developed and well-analyzed discount rate in which IR is to be compared.  Without discount rate, IR cannot be a stand alone measurement.  In the contrary, even with these blemishes, IR is a simple decision tool requiring less assumptions and research from the firm unlike ROE or NP (Investopedia, 2006).               Placing their varying advantages and disadvantages in the realm of foreign investment, ROE is suited for investors who wanted to establish assets abroad or foreign direct investment (FID).  This type of stake is relatively more costly, long-term and requires internal structure and strategy for maximum returns.  In effect, this places prospective investors to evaluate their investments within the lens of the whole corporate value and operations.  On the other hand, IR can be compatible with non-equity investments as its measurement can give investors simple approach to risk and abrupt market changes.  In addition, IR is effective in project-based activities of a firm which gives investors the opportunity to earn and receive back their profit share in a short span of time.  The motivation to use IR is derived from the ease of pulling out investments abroad unlike fixed assets in which expatriation or war can diminish investor’s income generating stake.  Since ROE uses evaluation inputs from the elements of the firm while IR from the elements of a specific project, investors can choose appropriate tool in relation to their risk level, withdrawal preferences and self-proclaimed goals. The key in determining Net Present Value (NP) is the discount rate.  Used in capital budgeting, NP is the most dynamic and widely used method in evaluating long-term projects.  Its major criteria state that “projects that have positive Naves are worthwhile while those with negative are not”.  But Naves are not perfect.  Although analytical tools like net present value (NP) are helpful, the greatest obstacle to minimize the need for working/ physical capital to be able to enhance free cash flows is not guaranteed.  There is some work to do even after computing for Naves.  By locating inefficiencies and value-adding activities, deferral or elimination of projects that can be a deceptive action (due to savings) can be re-analyzed to locate possible opportunities that are kept untapped (1993).  Naves are simply the summation of discounted annual cash flows of a project.  It is derived after the net income of the project is illustrated (e.g. expenses like marketing costs are deducted or non-cash transactions like depreciation expense are brought back to the net income).   Ire’s capability to analyze cash flows stems one of its strength which is to compare cost streams between two projects (Martin, 1998).  It is a tool to screen individual projects and their profitability in which ROE lacks as the latter is holistic in its financial analysis.  However, aside from its historic position being an underdog to NP, IR is ineffective in calculating a project with a mixture of multiple positive and negative cash flows because there can be at least two solutions due to the effects of market factors (Investopedia, 2006).  Another bottleneck is the determination of well-developed and well-analyzed discount rate in which IR is to be compared.  Without discount rate, IR cannot be a stand alone measurement.  In the contrary, even with these blemishes, IR is a simple decision tool requiring less assumptions and research from the firm unlike ROE or NP (Investopedia, 2006). Credit:ivythesis.typepad.com

Sample Essay Investment Appraisal Techniques and their Associated Risks

III. Investment Appraisal Techniques and their Associated Risks Return on Equity (ROE) is a business ratio that measures the return the...

Sample Uranus Investment Company Limited Essay

Change Management HK Uranus Investment Company Limited   Executive Summary Report Summary It can be noted that the competition in the business world is very stiff, especially now that different technological advancement are occurring. In order to survive in the market, different companies are trying to find the best management style and strategy in order to be successful. Companies, nowadays, have to cut cost to the bone by downsizing, outsourcing, offshore IT development and management.  The growth of an organisation now depends on the capability of the businesses to innovate.  Accordingly, change is no longer regarded as the exclusive preserve of the research and development department.  Instead, many businesses see that innovation must become a part of the core competency of every part of the organisation and its network of business partners (2004).   Relevance with the Organization Perhaps, each organisation wants to initiate a management and business approach which could maintain the competitiveness, capability and strength of the organisation. It is deemed essential that the management and the leaders of the organisation should be open minded for changes so as to adjust and adapt the most recent development and trends within and outside organizational environment. Since, only constant in this world is change and because of the emergence of new technologies, different industries, find themselves usually adapting. For them, change can bring various enhancement and improvement in certain business elements. In many ways, change enables company to maintain their competitive advantage in the marketplace and helps them determine and meets the needs of their target market. Hence, as a competitive organization, must be open- minded to changes so as to have sustainable market ability and maintain the competitive advantage of the company.   Introduction Company Background Hong Kong Uranus Investment Company Limited is a manufacturer and distributor of digital cameras and other electronic devices in the region. The company has been established in 2005 by its owner. The primary competitive advantages of Uranus Investment Company Limited is its OEM capability, broad experienced in its research and development department, reliability, large product line and good reputation. The brand name of the company is known as EWCA and it is currently exported in major countries like North America, Mid-East/Africa, Asia, Central/South America, and Western Europe.               HK Uranus Investment Company Limited is an ODM and OEM manufacturer to produce different ranges of electronic devices like digital cameras, MP4 and mp3 player, mobile phone, GPS car navigator and digital camcorder. The main objective of the company is to provide quality products and services to the global market.     Brief Description of Change             Each and every industries may it be small or large companies are subject to different factors that affect the firm’s function as a whole.  In the light of this, there are certain ways or techniques that can be considered in order to emerge and continue to be competitive within the market place.  One of these is the initiation of changes and innovation within the industrial sector so as to provide quality products and services to the consumers and to ensure that the company will be able to outgrow their rival companies. Typically determined as change management, various industries and businesses try to integrate changes into their strategic management so as to be more competent and efficient in satisfying clients or customer needs.  Accordingly, change can be regarded as the implementation of and management innovation, in which the vital objective e is to enhance output through an adaptation of new and effective business practices (1998). As an inevitable competitive leader in the fast food and dining-out business, Uranus Investment Company Limited has always try to innovate their products and marketing strategy  so as to achieve quality products and services to their customers which is a part of the string commitment with the business. The change process will be in line with the perceived technological advancement of the company to meet the needs and demands of their customers. .   Current Cultural State Analyzing cultural aspects is equally essential, in order to understand the various needs of different individuals that belongs to different cultures (Hofstede 1991). With this ideology, the company has been able to give importance not only with the Hong Kong and market but most especially to stakeholders in the international level. In addition, Uranus Investment Company Limited management sees to it that they value the opinion of their employees no matter what is their nationality.  Since, this company is competing globally; it cannot be denied that they need employees from different cultures to be in the company to help in the decision making.  It is also indicated that the international managers has been able to create a positive relationship in the local managers because of the reorganization done by Uranus Investment Company Limited management.   Analysis of Issues Because of the existence of different competitors that provide quality and more advanced electronic devices like digital cameras, mobile phones and others, Uranus is in need of a change management approach to make sure that they will be able to compete well in the market. The change plan is in line with the perceived development of new products and services for the global market.   Factors for Changes Companies, industries and working organisations may implement a change in their management system due to the internal and external forces (Yee 1998).  The external and internal factors or drivers are considered as the elements and aspects that that force changes in an organisation (Yee, 1998). In this regard, change management may be done at various level in the structure of any industry (Swenson, 1997) and that changes and transformations can be considered as limited or universal (Reigeluth, 1994) in nature.  For this industry, the internal drivers may include the evolving business needs, revision to corporate strategy objectives, organizational restructuring and other factors in the internal environment of the industry. On one hand, external drivers can include enhancement in technology, especially in this kind of business and also the economic aspects that influence the value for money and profitability of the relationship and the need for electronic or technical service.              Change management can be noted as a specific business activity in realizing the objectives and mission of an industry even as change management is the sensible or physical steps of employing an innovation.  The employees and their good relationships are regarded as the main components to its successful implementation, and sustainable systems are needed to attain e the development and improvement in its process.             The identification of sections for enhancement and development is the first level of the change procedure followed by the integration and combination of plausible solutions to address business conflicts and issues which are being identified. Actions in this part of the process are being held independent of the position within the company. Herein, the chance process may be imposed at different sectors in the structure of firms (Swenson 1997) and that transformations may be universal or restricted (Reigeluth 1994).  Internal forces that drive changes include growing business needs, organisation reform, or adjustment and modification of the corporate strategy or business objectives. On the other hand, external drivers may include the improvement of technology, the need for electronic and technical services and the economic trend and development that influence the profitability of the industry.             In initiating changes within a business sector, there are many factors that must be considered in order to make certain that the changes will enhance business performance and adheres to the vision or goals set. One of these factors is the willingness of the management of the company to initiate innovation. Without the support of the entire management, the innovation of the company will not be possible. In line with Uranus Investment Company Limited it is important that the management of the company will provide its full support for the innovation plan, process and design.  Another factor that must be considered is innovation manager. Another factor is having a thriving organizational culture. Organizational culture is the “deeper level of basic assumptions and beliefs that are shared by members of an organisation, that operate unconsciously, and that define in a basic ‘taken for granted’ fashion an organization’s view of it and its environment.” (Schein 1985) A less precise definition is that culture is the way we do things around here. Organizational culture involves symbolic actions and physical settings.   Scope of the Changes             For this report, it can be said that the change scope will be limited to the implementation of the new product development approach in Uranus Investment Company Limited. In this innovation, the critical factors that must be given attention is the management system and manufacturing department as well information technology department of Uranus Investment Company Limited.   Sources of Resistance       Although there are different factors that support innovation, there are also some aspects which inhibits or restrain innovation. The following are the possible resistance that inhibits the success of innovation; these are the perception or reaction of stakeholder, absence of management support and organizational culture and absence of support.       One of the sources of resistance that can be associated with his change management is from the employees that include their reactions or the members of the Uranus Investment. Although there are staffs and employees who will be in flavour in the changes for example in advancing the technological facilities of their offices, some may not be in flavour or such implementation.   Some would say that the improvement should not be done for these facilities due to the tendency that to malfunctions.  In addition, the people that implement such technological advancement might not have enough technical and technological skills to resolve the malfunctioning of the facilities.             Inability of the management to provide support on the implementation of the innovation will hinder the transformation in achieving the set goals. Furthermore, it is also important to note that communication skills are also a factor that must be considered. Lack of communication among management and mangers who will implement the innovation may lead to conflict which may affect the overall progress of the innovation. The cultural attributes of the members of the Uranus Investment may have the tendency to create inner conflicts in the company. Due to cultural differences, the staff of the company may not have harmonious relationship thus making the implementation of change complicated and unsuccessful. Furthermore, cultural differences may lead to new conflict within the Uranus because of the arguments and other conflicts that might be created from this issue. When reviewing the interaction between empowerment and culture, the Uranus must be able to determine and understand those subcultures that might engender a business environment more or less empowering than the larger organizational strategy (Wilkins & Dyer, 1988).   Contingency Plan In this contingency planning, the Uranus should be able to create a thriving organizational culture and a stronger organization strategy by good management of the employees and other members of the organisation, providing their needs so as to make them motivated for the benefits of the organisation. Furthermore, business elements like organisation design, work processes, organization design, performance management, and compensation program and career path are part of management strategy and strategic plan to ensure continuing success in the change management approach. The change management process created by the company must have been seen that they may also encounter some conflicts with some of their employees like employees, customers and others. In addition, in managing people with different norms and cultures, the management of Uranus should also incorporate a governance process to make sure that equality among employees are being provided. Hence, even though it can be considered as one of the most difficult things to handle in a change management plan, this would improve the employee’s loyalty and hard work that which may not only provide good outcome for the company but also to the whole market environment.             Another conflict that may be encountered in the change management is the absence of support in sustaining the success that can be attained in the process.  Since change is considered as a social process which should be undertaken in all the phases and not just a decision activity, those who are included in the change process must undergo learning experiences to be able to appreciate the objectives of the change.  To be able to solve such conflict, the management of the Uranus Investment must be able to see to it that the purpose, goals and objectives change management have been disseminated properly and that all the members of the company must know that they are important in making such change process successful. Thus, Uranus must have the ability to anticipate all the possible conflicts that might be experienced which would hinder the employees and other involved company members to support the change that would be implemented in the company.   Leadership             Leadership comprises the aptitude and ability to inspire and influence the thinking, attitudes, and behavior of other people (Adler 1991). Leadership is a process of social influence in which one person is able to enlist the aid and support of other individuals in the achievement of a common task (Chemers 1997).  The current leadership style of Uranus Investment is the authoritative or democratic style of leadership.  In this type of leadership, the leader and the selected subordinates are involved in the process of the decision making. Herein, the subordinates have the right to voice out their ideas and thought which they think would be helpful for the leader in making the final decision. On the other hand, in this style of leadership the leader is in control or has the authority for the final decision.  This kind of leadership style is very suitable for implementing the said change for the organization. Through this, the leader of the company may be able to know the opinion of the subordinates in order to effectively impose the changes within Uranus Investment Company Limited.   Prognosis: Scenario No Change Scenario The company is assured that they still do not need the changes of their products since they know that all their products are still more advanced in terms of technology than other company. In this manner, Uranus Investment believes that having a new product development is not yet advisable for the company because of the ongoing support of their customers to the products and services that they offer. The company also believes that changes in this aspect are not necessary because the products and services are still in quality manger with high technological advancement than their competitors. In this manner, if the choice of the company is to continue their marketing and product development process without changing or imposing new management approach.  Herein, Uranus Investment will continue to use their market approach and provide support with this existing approach by improving its concept and have a trained and skilful staffs to handle such existing manufacturing strategy.   Change Scenario             The change is needed so that the customers will be aware that Uranus Investment Company Limited adheres to the needs and demands of the customers for having a technologically advanced products offered. The change will be implemented as soon as the organization had strategically plan the changes and all the concepts needed to make the change successful. The change is needed so that the company will be able to have a more comprehensive product development that will meet the needs of their target market in this generation in the global market.   Conclusion Accordingly, the management of Uranus must be willing to keep their fingers on the needs of the company by monitoring what is efficiently working and not working in the change management. To be able to execute strategic changes successfully and effectively throughout the company, the management must establish a better environment for changes, reassure, support, and commitment on the industry. Hence it can be concluded that that, changes of management is indeed one of the most important aspects that must be considered by an organisation. The management must see to it that the changes made really improved the strength and competitiveness and strength of company.  It is said that it is successful, if and only if, a thorough assessment and evaluation of the industry’s performance has made. And if such study recommends that there is a need for change, then that is the only time, the management of the company should implement required changes to be done. Since change management system is very crucial, inefficient decision can make the company faced its biggest downturn instead of having a more competitive business portfolio to survive to the stiff competition in the global market. It is recommended that HK Uranus Investment Company Limited must see make sure that the changes are well planned and strategically imposed because these will the basis for having a successful implementation.   Strategic Analysis: HK Uranus Investment Company Limited   Introduction             There are a number of business industries operating all over the world. Specializing in various product and service lines, these industries aim to succeed through considerable sales generation and high market coverage. In Hong Kong, several businesses are operating as well. As there are many industries in the country, competition for sales and market is strict. Operators are then applying various methods and strategies that will help in maintaining stable business status, continuous growth and success.             In this regard, this business report aims on analyzing the strategies used by one of the industries in HK, which is Uranus Investment Company Limited. The strategic analysis of this company will focus on the evaluation of its marketing environment.  In this manner, the industry will be able to apply a more appropriate plan based on existing business situations and challenges. In this paper, the electronics industry, specifically the digital camera industry will be taken into account. Various marketing assessment tools will be used to assess the industry. The findings of these tools will then be used to foresee the standing of the company in Hong Kong in the coming years.   Overview of the Company             Hong Kong Uranus Investment Company Limited is a manufacturer and distributor of digital cameras and other electronic devices in the region. The company has been established in 2005 by its owner. The primary competitive advantages of Uranus Investment Company Limited is its OEM capability, broad experienced in its research and development department, reliability, large product line and good reputation. The brand name of the company is known as ECA and it is currently exported in major countries like North America, Mid-East/Africa, Asia, Central/South America, and Western Europe.             HK Uranus Investment Company Limited is a ODM and OEM manufacturer to produce different ranges of electronic devices like digital cameras, MP4 and mp3 player, mobile phone, GPS car navigator and digital camcorder. The main objective of the company is to provide quality products and services to the global market.   Strategic Analysis             The description of the industry above suggests its strength in the Hong Kong setting. However, a more detailed analysis is necessary in order to determine the real strengths and possible problems that surround the industry. For this purpose, various tools will be used to analyze the electronic industry of Hong Kong.   PESTLE Political The political aspect of the country has less impact to its business sector, or more specifically, to the electronics industry. The Basic Law of the country actually protects it from major transitions in law in spite of its transfer to China. Through this basic law, the way of life as well as the capitalist system of the country will remain the same for fifty years since the transfer. Thus, political factors have minimal effects on the electronics industry. The production, export and import of materials for digital cameras will not be affected for the next ten years due to this political agreement. Hence, the production facilities for digital products situated in China will not be forced to relocate back to Hong Kong due to regulative measures. Hence, Hong Kong enterprises in the industry can continue to benefit from low cost production in China.   Economic The economy of Hong Kong is highlighted by the status of its international trade. The country is one of the leading trading nations worldwide; hence, it is one of the important aspects of the country’s economy. Hong Kong market has been favorable to trade and has been efficient in balancing its exports and imports. The significance of trade in the country suggests the richness of its other related fields such as the electronics industry. This has been evidenced by the high contribution of digitalized products to individual company sales and overall economic development. The important role of the electronics industry in Hong Kong suggests that there are several similar businesses that exist in the country. Due to high levels of competition, the companies operating in this industry are placed under much stress of offering the very best. This also implies the significance of strategic management among these companies not only to contribute to the economy, but most importantly to maintain strong business foundation as well as combat competition. Assuming that the prosperity of the economy in Hong Kong improves for the next ten years, the electronics/AV equipment industry will then continue to improve and acquire various developments. But then of course, economic status is among the most unpredictable aspects of a country; hence, the industry must be prepared for future challenges that may arise. These future challenges include economic crisis, price fluctuations and problems on international trade.   Social             The societal and cultural background of the country is mainly influenced by the Eastern and Western influences. This perhaps, is partly due to the status of the country as a major center for business and trade. Although the country is greatly influenced by a number of different cultures, the country still has its old Chinese features intact. While keeping old Chinese traditions and cultural practices, the country is also open to changes brought about by international influences. This in turn makes the nation’s culture rich and varied. The prosperity of Hong Kong’s economy is significantly reflected in its citizens’ lifestyle. Compared to other Asian countries, the people in Hong Kong are among those who live with the highest standards (Microsoft Encarta Online Encyclopedia 2005). This implies that the people of Hong Kong have access to some of the finer things in life, including technology.   Technological             Hong Kong is a melting pot of both Western and Eastern backgrounds (Chu, 1997). The Western and Eastern influences that make up the country’s socio-cultural background play a significant role to its current technological status. Considering that Hong Kong has direct access to technological developments (Simon, 1995) from different countries worldwide, these can be adapted in the country quite easily. Moreover, the high standards of living among the country’s citizens imply the ability of the people to support technology as well as their ability to apply or implement them. The exposure to technology of both local and international market makes digital products, like camera, a marketable product.   Legal             Locally, the political aspect mentioned previously does not seem to affect the electronic industry in Hong Kong. In international trade, the laws on open trade and free port allow the industry to exports its digital products to foreign markets. Though the Hong Kong industry can distribute its digital products freely abroad, the openness of trade as well as the globalization aspect further worsens the competition among similar companies under the same industry. If competition will affect businesses in the industry, it is likely for other nations to implement legislations that will control the entry of imported products. This will greatly affect the status of the Hong Kong industry if this will occur.   Environmental  One of the major issues under the environmental aspect that directly affects the industry is probably its location of production building and facilities in China. The cost of labor and land in China, particularly in the province of Guangdong, is significantly cheaper than in Hong Kong. Thus, it is more practical to conduct the core activities of the electronics industry in China. However, products produced by the AV industry require skills among its work force. Thus, cheaper labor cost may no longer be possible as companies would have to pay larger salaries for skilled and highly educated employees. Moreover, a number of manufacturing companies are also relocating to China, thus land costs tend to be higher as compared before (1997).    Competitors Analysis   The production of digitalized products falls under the electronics company, specifically under the audio-visual equipment category. In Hong Kong, the competition in electronics industry is considered as one of the most vigorous and tough. The manufacturing companies of digital cameras and other electronic devices in HK are made up of SMEs or small and medium sized enterprises. The production facilities however of most companies are located in mainland China. Thus, the Hong Kong offices are concentrated more on product development, quality assurance and marketing (Hong Kong Trade and Development Council, 2004). One of the competitor of Uranus Investment Company Limited in HK market is the Canon industry and other industries that offer digital cameras and electronic products all over the world such as Sony, Panasonic and others.               According to the HKTDC (2004), digitalization trends paved the way for the industry’s significant development which makes it digital camera and electronic industry more competent. In addition, the company has many rivals since there are many other competitors which provide a wide range of digital and electronic devices to meet the increasing demands of these products. players have increased considerably. This business trend led to the increased profit derived from high sales of digital products, suggesting the strong chances of success in the industry. Moreover, profits from exported digitalized products are high in Hong Kong as well. This then implies that international market strongly supports the industry.   Porter’s 5 Forces Model Rivalry             The rivalry within the electronics industry comes in two categories. Locally, the main competition is between the small and large enterprises. Major companies in the electronics industry have stronger brand names and have greater capabilities of reaching the international market. This is a significant factor as brand names in digital products represent the overall quality of the item which consumers are after. Major companies also have more resources to promote the product through more expensive forms of media advertisement. Thus, smaller companies are directly affected. In the international level, the rivalry exists between the Hong Kong companies and the major AV equipment companies of other countries.   Competition from Substitute Products             With the rise of technology, alternative options for gadget and similar products are very much available. Digital cameras and other products are no exception. At present, cellular phones are manufactured with camera features, allowing consumers to use the phone not only for calling or sending text messages, but also in capturing and storing images. Other video camcorders have camera features as well; thus, some consumers would prefer to but an item where all features are already integrated. Web cameras are also alternative products for digital cameras. In addition, some of these alternative products are less expensive and more practical as compared to buying a digital camera alone.   Competitive Threat of New Entry             The percentage contribution of the industry to the Hong Kong economy suggests the huge number of businesses manufacturing digital products. This then suggests that barriers of entry for new business entrants are low. New business could easily operate locally; moreover, the Hong Kong industry offers multiple product lines under different brand names. Hence, competition is rather strict. Moreover, most of the business in the electronics industry is considered SMEs, implying that the levels of small businesses or new entrants are high. With the high availability of digital production facilities, new entrants could easily start manufacturing and marketing digital products.   Bargaining Power of Suppliers             In the case of the Hong Kong electronics industry, the bargaining power of the suppliers is high. Most of the materials used for producing AV equipment are imported from suppliers, thus they have greater control over the prices of supplies as well as the delivery.   Bargaining Power of Customers             Customers have access to multiple alternatives for AV equipment and products, thus, they have greater control over which item to purchase. The high competitiveness within the industry allowed consumers to have access to a number of options, from brands to types and prices of products. Thus, consumers have a high bargaining power over the electronics industry. In this case, the smaller enterprises are greatly affected. Although consumers have different purchasing behaviors, in most cases brand names greatly influences the preferences of buyers. If there will be other options, consumers is likely to buy known brands even if they will have to pay extra.   Evaluation             Based from the environmental and competitive analysis done for the electronics industry, the findings will then be evaluated. In this section, the possible developments of the industry for the next ten years will be considered. Factors that could affect this progress, both positively and negatively, will be cited.   Optimistic             Based on the analysis done, the HK Uranus Investment Company Limited is likely to succeed and progress in ten years time due to two important factors. One of these factors is the market of the industry. At the local level, the consumers are very much aware and exposed to highly technological gadgets such as the digital camera. In other foreign markets of the Hong Kong industry, such trend is also evident. In ten years time, technology will continue to grow and introduce high-tech gadgets and products that people will patronize. Thus, the future development of digitalized products made by HK Uranus Investment Company Limited will be supported by the market due to their openness to technology. Moreover, this market patronage will naturally result to continuous profit generation and market growth. Another factor that will contribute to the success of the HK Uranus Investment Company Limited ten years from now is the continuous rise and development of globalization and open trade. Through these aspects, Hong Kong will have greater market access abroad, leading to better market and business outcomes. Furthermore, free port will allow the HK Uranus Investment Company Limited access to more modern technologies that can be useful for manufacturing and marketing digitalized products. This in turn will make the HK Uranus Investment Company Limited more competitive against foreign brands.   Pessimistic             While there are great opportunities that the HK Uranus Investment Company Limited can use for future progress, certain obstacles could hinder it from development. For instance, the use of technology is highly accessible to all potential business operators in the industry, increasing the problems on competition, less distinct products and brands. In addition, technological gadgets like digital cameras lose value at a fast rate; thus, it is likely that such innovations would lose their worth to the market, or worse, this product could be phased out totally form the industry and be replaced with better substitutes.             Problems in the economy are also a challenge. Crisis in the economic aspect is omnipresent and difficult to predict; hence, it is always a problem for all industries and business sectors. Due to these problems, prices for labor, land, production and other business activities could increase, making it difficult for the industry to succeed. Prediction             Based on business outcomes in the past, the pessimistic scenario is the one that is likely to occur in the future. Old electronic products like mobile phones, cameras and computers for instance, had been easily replaced by digital ones due to fast-phased development in technology. At present, several companies in the electronics industry are still conducting researches in order to introduce new technologies that the market demands. In addition, economic crisis is a natural occurrence, though an unpredictable one. Thus, even without predicting when this will happen in the future, businesses attempt to overcome the effects of economic challenges by preparing themselves in advance.             Although it is likely for the optimistic scenario to occur as well, businesses in this industry must focus themselves on overcoming the worst scenarios. By preparing in advance, the businesses can prevent further problems in the future as well as maintain the progress of the industry.   Conclusion             In spite of the apparent success of the HK Uranus Investment Company Limited in Hong Kong, certain factors in its environment can cause its possible failure in the years to come. Economic challenges, competition and varying consumer trends are just some of the external factors that the industry must overcome in order to ensure future progress. Although these matters may appear inevitable, certain actions could help the industry to succeed, locally and internationally. Continuous product enhancement and development for instance, can help in countering fast-paced technology. Conducting consumer studies on the other hand can facilitate the challenge on changing consumer behaviors. These actions in turn can help in combating business competition and globalization issues.  Credit:ivythesis.typepad.com

Sample Uranus Investment Company Limited Essay

Change Management HK Uranus Investment Company Limited Executive Summary Report Summary It can be noted that the competition in the ...

Sample Essay In General is the performance of the business had increase after the investment

Questionnaire 1. What is your H2 income return (profit) for?             a. June (2005) =                                            b. Dec (2005) =                                             c. June (2006) =                                            d. Dec (2006) =                                             e. June (2007) =                                2. Trend in your business turnover in past three months? (pls. check).             a. increasing                                      b. unchanged                                     c. decreasing                         3. The trend of the order in past three months? (pls. check).             a. above normal                                c. normal                                            d. below normal                     4. If above normal what is the possible reason for this? (can choose more than 1)             a. quality of the product                                b. price of the products                                 c. advertisement                                            d. function of the product                              e. demand for the product                            f. price of the product                                    g. others (pls. specify)                      5. If below normal what is the possible reason for this? (can choose more than 1)             a. quality of the product                                b. price of the product                                   c. lack of advertisement                               d. competition                                    e. low demand                                   f. others (pls. specify)                          6. The trend of the customers in the business?             a. getting shorter                               b. unchanged                                     c. getting larger                     7.  The percentage of the budget spends in the material cost?             a. 0%-20%                             b.21%-40%                            c.41%-60%                            d. 61%- 80%             e. 81% – 100%          8. What is the H2 income return after the investment had made for?             a. June (2005)                       b. Dec (2005)                        c. June (2006)                       d. Dec (2006)                        e. June (2007)           9. Trend in your business turnover in past three months after the investment? (pls. check).             a. increasing                                      b. unchanged                                     c. decreasing                         10. The trend of the order in past three months after the investment had made? (pls. check).             a. above normal                                c. normal                                            d. below normal                     11. The trend of the customers in the business after the investment had made?             a. getting shorter                               b. unchanged                                     c. getting larger                     12.  The percentage of the budget spends in the material cost as the investment is on going?             a. 0%-20%                             b.21%-40%                            c.41%-60%                            d. 61%- 80%             e. 81% – 100%            13. In general, is the performance of the business had increase after the investment?             a. Yes                         b. No                                                     Introduction             As we live in this world we need to have a shield to conceal us, a protection to cover us and a security to take us away from danger. Our house, the buildings, the schools and even churches these are only few examples of the constructions that protecting us in the sun, in the catastrophe that may come and even in the rain. But, do you ever think of who protects them while they are protecting us? Do you ever think that even that single piece of thing can also be damage if ever it was not protected properly? And if ever it was happened. Then, the persons who are totally affected were us as the one who protects by them. Try to take care of them properly, as we take good care of ourselves. In taking care of them we must take them away from danger that may cause them to ruin which possibly can result to decay. To avoid these, we need to protect these things to damage just like protecting from water by using a waterproof products we can prevent the cause of the damaged of our materials.             Waterproofing has been widely use throughout the world. Its not just use as a shield to the water but also it serves as a protector to prevent the product from breakage. Waterproofing is the treatment of a surface to prevent the passage of water under hydrostatic pressure, or the process where a building component is made totally resistant to the passage of water and/or water vapor. It is most commonly used in reference to building structures (basements, decks, flat roof, wet areas, etc.), watercraft, clothing or paper products (milk/juice cartons). The importance of having waterproof products is that it cleaned and maintained property to ensure it lives a long and healthy life.             One of the largest waterproofing companies in Hong Kong is the KM Waterproof Co. Ltd. It provides products that can be use not just in the in your own personal needs, not just in your house, but also in the business as the buildings and so much more. Being one of the leading waterproofing companies it is obviously to see that this company had gain a very good profit during the past years. But, if we look into it, the company is still unsatisfied when it comes to the net profit that the company gained during the past years. Aside from that, it is the goal of every business to grow, to expand, and to share to products to the other land. That is the objective of KM waterproofing Co. Ltd. invest in the Mainland China so that it will reduce material cost and to stabilize the supply which means that this move can greatly affect the status of the company’s earnings and also can affect the sales of each product. This will also take some risks in the business because there is no assurance that this business will be supported by the other nations. The company should also take two to tango in this aspect so that its goal of producing products which have low cost materials but with high quality product will be attain.             Then, this study will serve as the blueprint of the company in pursuing its objective to go to the next step of its business and to gain more profit out of the low cost materials. This company also will give the chance to think of the much more solutions in improving its products that has been based in Mainland so that this will serve as its guide for their next project. The company will also have the chance to think of the proper way in optimizing its profit while minimizing its cost and producing highly commendable products. As the KM Waterproofing Co. Ltd. is concern it should be well managed and at the same time it should have the guts in pursuing its dreams to invest its products in mainland because it will encounter so many factors in acquiring this goal since it is just the strategy of the company and the bottom line for this is to have a background and a very good knowledge to the business as the reducing of the materials and the stabilize the supply and that’s the use of this study, this will give the idea to the company of the most and widely used decisions in producing a high quality of products in the other land. This study will sought answers to the questions as to examine the financial performance of the company in the past few years. This performance will tell the trending of the company in terms of the products that had produce, the sales, the financial status of the company even if the investment had not yet done and after the investment was made, the capacity of the company to go further, to the short term and the long term the company plans. Another objective that must answer in this study is to conduct a comparative analysis of the cash flows before and after the investment, this will serve as the basis of the effectiveness of the move or the strategy that the company had done in the field where in they had fit. In this area, we will have to see the difference of the performance of the company as soon as they get involved their attached their business in the mainland. In this particular cash flow, we can determine the flow of the business including all its financial transaction and the budget that spends each transaction including all the expenditure as the cost of the materials and the product’s stability. The last thing that should be done in this study is to create conclusions and recommendations regarding the working capital requirement and the cash management on both short-term and long-term basis. This can help us to determine possible ways in improving the business and the possible ways in determining on how to get improve the business’ capital.             Generally, the purpose of this research is to study the Cash Management for KM Waterproofing Co. Ltd. in the Mainland factory investment for waterproofing material cost reduction, therefore its aim is give the owner the possible step to go on in determining the best and the most suited technique in improving and gaining such kind of business.                               Background of the Study             To determine the study of Cash Management for KM Waterproofing Co. Ltd. in the Mainland factory investment for waterproofing material cost reduction, we should determine first the company’s background. KM Waterproofing Co. Ltd., established in 2002, is a specialty constructions firm providing waterproofing, caulking, and moisture protection services in Hong Kong. The business growth has about 30% increases per annum and the future is expected prosperous. However, the company’s net profit increase was not satisfied due to labor and material cost rises.             Waterproofing construction work requires waterproofing materials such as Sun-proof Acrylic Waterproofing Coating, PU Waterproofing Membrane and Transparent Waterproofing Coating. The supply was unsteady and some products were even in shortage occasionally. Management identified the issue in a recent board meeting and planned to invest in a Mainland factory that manufacturing waterproofing products in order to reduce material cost and stabilize the supply.             A research is therefore carried out to study the working capital requirement and cash management on both short-term and long-term so that management will base on the analysis to asses the implementation feasibility and perform justification. Related studies on better profits (1995), improving cash management ( 1997), gathering capital (King, Alfred M., 1994), forecasting and managing cash flow ( 1997) and optimizing the cash flow timeline and improving financial efficiency (1995) will be carried out.             The author intends to use the theoretical framework that examines whether the cash management fulfills the investment requirement. Credit:ivythesis.typepad.com

Sample Essay In General is the performance of the business had increase after the investment

Questionnaire 1. What is your H2 income return (profit) for? a. June (2005) = b...

FINANCIAL INSTITUTION AND INSTRUMENTFS

Introduction             In an economics point of view, excessive stock market speculation is an inefficient way to allocate resources since the market is not resolving capital requirement and savings destination according to equilibrium purposes.  On the other hand, lack of it would typically result to higher transaction cost of stock market participants due to monitoring of firms actions and service fees to brokers.  Due to this, a macro- and micro- difficulty is present in the system.  As a reply to this bottleneck, this paper aims to address the micro-problems investor would face in investing in stock market with trading/ investment destination being St. George Bank.  The bank is the fifth largest bank in Australia and belonged to elite publicly-traded firms in the Australian Stock Exchange.  This paper includes a profitable trading/ investment strategy based on assessment done in political, economic, market and firm figures which is located at the second part of presentation.  The data included here and framework used is gathered in relevant websites, books and journals.                 Profitable Trading Strategy The Trading Itself             The shares of St. George can be considered as fairly accurate measure of economic trend and financial market decisions.  It is within the top 15 publicly listed companies in Australia (2006) that places its shares reasonably among high ranked common stocks in the country’s stock exchange.  In addition, the economy is found to be on the early stages of economic cycle (see attach 1) which suggest that stock prices are also climbing.  With findings showing that there is no indication of too much speculation rather the market is in chorus towards emphasizing economic indicators, it is highly suggested that St. George shares should be bought in order to exploit the non-speculative market and supportive political/ economic gauges.                For the initial purchase suggested above, active asset allocation ( 2000 p. 62) will be resorted to be able to rationally decide where the financial markets are in economic/ stock price cycle.  Stage I and II, which is said to be the current placing of the markets, implies gradually rising stock prices from the initial low levels due to recession or fiscal and monetary adjustments of the state.  If the purchase strategy is applied today, there is a better chance for the investor to gain from selling the shares when stage III occurs.  This is, however, should be coupled with guidance from a broker or the investor’s own perceptions of the cycle emergence.  The strategy is somewhat speculation-based intended for short-term gains which cannot exploit tax incentives of a 365-day fund investment ( 2006).                In a different approach, there is a bright long-term gain from St. George stocks as its financial position and future outlook is supported by a growing economy and stable-to-rising interest rates.  The potential of the firm will not be easily distorted/ disregarded by the market since speculation is not yet there.  In effect, both short- and long-term gains in buying its shares are attributable to possible investors.  This place premium on their investment decisions since the threat of interest rate increase of consumer due to increased purchasing power and spending coupled by bullish economy can be easily mitigated by selling the shares and get a mark-up from such sale.  In contrast, the continuous (at least one year prior to purchase strategy) bullish economy would be beneficial for the firm and it will be able to issue dividends as well as business expansion which entitled the investor also to medium-term gains and increased expected future earnings.   Coupled with Investment Decisions Due to the importance of sustainable wealth creation for the shareholder, the earlier identified as active asset allocation is replaced by passive asset allocation (2000 p. 63) after the initial purchase.  This act of redefining the strategy is attributed to favorable conditions of the firm, markets and the economy.  In addition, the strategy would be at risky and unpractical position if the investor will continually concentrate and place his resources and risk in one firm.  As a result, there is a need to diversify investments that makes passive strategy crucial.  At this point, active allocation is deemed expensive especially when the investor maximizes its wealth by a diversified portfolio due to broker’s fee.    On the other hand, focusing on the shares purchased from St. George, the strategy should take into account the emergence of stage III wherein the market starts to anticipate economic recession/ contraction.  As a result, the price of both stocks and bonds will drop at low levels.  This time is the most critical to the purchase strategy done earlier.  At this point, even if the firm continues to grow in profits and liquidity, the market will likely speculate that such positive momentum will eventually fall due to lack of money in the economy.  In effect, it is time to either sell purchased shares for a mark-up or rely in the diversified portfolio equalization.  The former gives the investor enough liquidity to face the challenging down trend/ relaxation of the economy while the latter is ambiguous of such gains as he will wait for another stage I and II cycle to harvest results o compensate for speculation in the long-term success of the firms.               At this stage, the share is sold for investment on money markets.  At this point, money markets are the most attractive investment alternative since bonds and stocks are in their low-level of yields.  Everybody in the economy, except of course for the government, lacks liquidity and is willing to place premium on hard cash.  After this short money market investment, eventually, stage IV will ensue which suggest the start of economic recession as the political and economic actors try to reconcile interest rate, inflation and economic activity.  As a result, the investment in money markets are gradually relaxing premium earlier applied in stage III since the government is now willing to issue another pool of money in the economy to start the economic cycle again.  In effect, premiums are given to buyers of government bonds.  The strategy, then, will anticipate this situation in order for the investor to have strong liquidity at the on-set of stage I and II.             This developed strategy is highly based on the ideal economic activity/ cycle the government, financial markets and firms are currently emphasizing in their decisions.  As a result, it becomes a combination of active and passive-diversified strategy depending on the reaction of the market and government to the current dealing.  However, as suggested by the following evidences, these actors are almost in uniform direction.  In effect, St. George shares are highly attractive in both short, medium and long run decisions.                                  Proofs and Evidences Background             For the stock price, an increase in expected dollar earnings of a firm with unchanged risk will increase its value while an increase in expected dollar earnings with lower risks will significantly increase its value (2000 p. 4-10).  Due to this scenario, higher-ranked common stocks are more preferred than lower-ranked stocks and the latter tends to be sold in favor of the former.  The former is defined as those stocks with highest expected rate of return for the risk or the lowest risk for an expected rate of return.  As earnings per share (EPS) indicates the dollar return for every stock an investor purchased, it is one of the most items in the firm’s financial information that receives highest interests.  For its part, the firm should solidify its claim of having high-ranked stocks to be able to compete for the limited available capital in the economy.  As debt financing is more risky than equity financing (since the firm is obligated to pay debts even minimal or no profits is obtained), this task of the firm should be convincing.                        Although corporate earnings have positive relationship with stock price (2000 p. 4-10) (that is, the greater earnings are, the higher stock price will be), external forces both political and economic in nature would barred the firm from optimal realization of such relationship.  In effect, being inclined or parallel with economic indicators is as crucial as internally generated earnings.  One indication of this is that expected earnings should exceed interest rate of government bond to be able to be competitive.  Another is that it should flow consistently with changes in interest rate, inflation and economic activity.  This will make the firm’s investors to avoid unguided speculation when making investment decisions.  It is a well-known dogma that no participant in a stock exchange can control the entire trend of stocks and so the consensus counts.  And where will a rational firm/ investor/ government base their decisions?  Of course, on what is really happening to the economy with small number of them speculating for short-term gains, that is, a mere buy and sell strategy.           Too much inflation (hyperinflation) has negative effect on stock price which can either be stimulated by pull and/or push consumer/ producer effects.  To dispute this, common stocks are viewed as inflation hedgers ( 2000 p. 56) as they can easily maneuver the cost of firm’s goods to follow inflation in the cost of production.  Generally, the adverse inflationary effects on stock price is rather of short-term basis while the long-run inflationary functions of common stocks can be derived by an investor who is willing to place his investment longer in the hands of the firm.       There are at least three types of traders/ investors in the stock market ( 1964).  This will serve as a guide for every trading/ investment strategy.  For portfolio managers, one profitable trading strategy especially for portfolio managers is top-down stock strategy wherein the economic and market environments are analyzed before making a decision.  Bottom-up approach emphasizes financial analysis of a firm’s data including comparison of stock performance against its competitors.  For technical traders, there is also a technique to forecasts stock price movements by using previous charts to identify trends and there signals of actually happening including their impact.  Hedging and arbitraging strategies are also used to aid in analysis.  For sales traders, another is the strategy that aims to determine the best price by having knowledge of trading partners and relative prices to identify who is liquid in the market and exploit such identification.   The Benchmark of Interest Rates: Government Bond             Government bonds are sometimes referred as risk-free investments because the debt is back-up by the state funds.  On the other hand, corporate bonds and shares should outperform these risk-free instruments by offering higher expected earnings with higher risks.  For its part, the Reserve Bank of Australia has the primary goal to control inflation through monetary policy that provides a general signal to the market when making its decisions.  In effect, the economic cycle (see attach 1) can be a ready tool for the market in determining the direction of the economy particularly direction of a government bond.  This will guide the market towards more accurate peak of the economy for long-term growth and prevention from disruptive bubbles/ speculations.               The Australian Government Bond is an attractive bond than the United States (see attach 2) because it exceeds the percentage yields of the latter for a 10-Year bond in both daily and monthly basis.  This means that local and possibly foreign investors are relatively in a more profitable position if their investments go to the Australian bond.  As government bond serve as the benchmark of the attractiveness of financial markets, this advantage trickle-down to private firms in search of capital and liquidity.  However, the monthly 10-year government bond yield movement of Australia shows that the economy seemingly is in the initial or last stages of economic cycle (see attach 2).  Money is out in the private hands to stimulate economic activities.                     The comparison of government and corporate bond yields (see attach 2) shows that firms still have the upper hand of the investor’s attention than the government.  It could also mean that the market is closely monitoring the movement of the economy and actions of the government which solidifies the absence of economic bubble.  In effect, economic indicators are taken more seriously by the market instead of speculations.  Further, investors preferred relatively riskier bond issuers in favor of relatively higher returns as illustrated by relative preference of BBB shares than AAA shares (see attach 2).  This contributes to the future prospects and performance of firms in the market because investors are out of their safety zones and ready to go with the direction of the management.  In short, they trust the business sector and capability of firms to meet their targets.   Inflation Rates             Inflation rate can provide indication for the market to view the direction of the economy and where is it currently in the economic cycle.  High inflation implies active economy which will eventually cause rising pressure to interest rate if other economic indicators like wages will not offset high consumer prices.  In a comparative illustration (see attach 3), the first half of the 10-year moving average of consumer price index and wages showed that inflation growth was faster than wage increase.  However, the second half of the decade had rebound the favor to the wage-earners especially due to more consistency of government’s move to adjust wage in the current condition of the economy.  In fact, wages posted higher percentage movement particularly 2004 onwards.                This brings into the picture the reliability of demand to equalize demand in order for firms to obtain their profit and return targets.  This is supported by favorable control on exchange rate of the Australian currency which settles the issue of dumping that can hurt local producers (see attach 3).  The currency moves along with import prices to avoid unhealthy competition in the economy.  As a result, the ambiguity of globalization factors is fairly controlled by the government which strengthens the belief of the market to the stability of political and economic factors.  Thus, the benefits are transferred not only on the producers’ sector but also to consumers (for internal control of quality and prices) and financial markets (both firms and investors).      Financial and Market Background for St. George The fundamental and technical indicators of Australian market show a favorable environment for investment and there is not yet potential economic bubble (1997 pp 309-310) facing the stock market.  Fundamental approach on this analysis has explained that price and earning ratio is stable and therefore no indication that the strong market is the result of significant speculation (2006).  However, there are economic areas that posted risks like resource sector particularly mining that shared the large bulk of market gains despite downsizing regimes.  This may suggest that the market might overestimate cost-cutting actions of such firms towards efficiency and underestimation of loosing opportunities.  In addition, the surging oil prices are always standing-by to attack strategies of firms not only the manufacturing sector but also consumer goods since freight for the finished products could pressure price increases.   In a technical perspective, the market is in a bullish channel (see attach 5) that suggested another cycle unfolding after reaching the maximum range.  This is solidified by the chart’s performance above the critical point of 4,500 ( 2006).  However, in similar footing with fundamental indicator, technical estimates show that the market is volatile due to abrupt surge of trading despite its ambiguity of future direction.  In effect, there is a need to put considerable effort for portfolio investors on financial data of their firms while classifying them as resource industry- or oil industry-related firm.  There is also a need to determine the future chart performance of the market to guide data of economic conditions and market’s updated investment decisions.    In its Interim Report 2006 ( 2006), St. George posted 11.5% increase in profits before significant items and in accordance to accounting standards while after significant items resulted to 0.3% increase to this percentage.  Dividend also rose to 10.4%, earnings per share (EPS) increased by 9% (excluding hedging and derivatives), return on equity up to 23% from 21.8% and expense to income down to 44.1% from 46.8%.  By this data, it can be said that the firm has strong earnings potential and continues to be going-concern to its business reflected by its cost-effectiveness in cutting down expenses or in a different approach providing superior products/ services at low costs.  Further, shareholder funds continue to gain as shown by EPS which means that investments in the firm have its way of increasing its value in the future.  This increase is also advantageous to investors because the movement of EPS is consistent to the movement of dividend payout (see attach 6).    Return on Equity (ROE) is also dubbed by the firm as superior ( 2006) although their announcement of strong expected performance in the future might pull this dubbing if the management does not meet its goal.  As an illustration, the aggressive volume taking of the firm had provided a year-on-year earnings and revenue stimulation in all its three key business areas in lending, retail deposits and managed funds.  The firm, despite this aggressiveness, had continued to perform well in its operations as shown by its interim result in March 2006 at 2M compared to 3M in September 2005 (see attach 6).    In the same time frame, the firm posted strong results in non-interest income primarily due to hedging and derivatives (a M gain) which was not the nature of bank’s operations.  This served as offset to drop in lending spreads due to competition.  The situation suggested that investors must give trust to the ability of the firm to recoup its modest losses in its primary operations by diverting some of its liquidity in speculative re-investments like hedging and derivatives.  The 70-year experience of the firm in financial operations should back-up the trust given by its investors ( 2006).      However, the firm should emphasize the importance of holding an asset for at least 365 days to be able for investors to maximize their capital gains ( 2006).  The fund tax rate within that time frame is 10% compared to 15% if the firm let go on the assets prior to such number of days.  As a result, the annual return of investors is understated by 5% which could be a big amount of money for someone who has substantial investments.  The fees being deducted by the firm has relative small impact that is adversely applied to investor’s financials compared on their loss of fast turn-over of the firm’s asset management.     The firm is also unattached to risky industry areas mentioned.  This means that fluctuations in these firms stock price due to external events will not directly affect the share of firm.  But, an exemption should be applied when excessive speculation (which was explained as not yet in the offing) emerges since the positive performance of St George would not be clear rather bias from speculators point-of-view.  Of course, the market will react to such speculations resulting to unrealized gains of St. George stocks.  Due to this, investors should be cautious on forecasts and future movements of the markets to anticipate the emergence of too much speculation.  This idea will also support the needed information from markets and economy.                   Another consideration that makes St. George shares a strategic investment is that it is consistent to the Standard and Poor’s/ Australian Stock Exchange 200 index.  As show by the graph (see attach 7), the moving average, or more appropriately, movement of share prices of both are almost in the same direction which means that St. George shares fairly reflect the general market sentiments of investors.  The fact that only 1,800 companies out of 1.4 million (2006) are registered in Australia, this firm performance can be a good starting point to base investment decisions.        Profit Position of St. George             As segmental profit contribution of retail banking is almost 50% for St. George (see attach 6:  May 2006), the expansion of this share has bright prospect due to increasing monthly values of retail sales in the country (see attach 4).  In the contrary, the market could not capitalize in extending capital gain options to households especially those in the upper income bracket since consumption is limited in disposable income (see attach 4).  The explanation of this could be the negative relationship of assets and savings in the household level (see attach 4).  This could be a signal that the population feels that the current economy is undervalued by asset prices and may invoking their speculative decisions through asset acquisition in replace of declining savings.                                 The debt of household is also in increasing trend (see attach 4) adding support to their asset undervalue speculation.  Money is in demand (on the hands of people) and out of banks reserves.  Interest rate increase may ensue as to control inflationary effects of shortage of money in circulation.  This poses challenge on the financial market since scarcity of capital is aggravating coupled by consumer spending.  As a result, fixed asset requirements intended for long-term strategies may not be optimal to firms while only those within highly-ranked common stocks receives special attention.  In effect, St. George (as one of the top-ranked firm in the country) will possibly survive tight capital reserves.   Conclusion                      The shares of St. George can be regarded as high-ranked which is guaranteed by its market position, financial standing and future prospects or growth.  The economic well-being of Australia suggests that the market is in the early phases of stage I which makes the purchase of stocks both profitable and strategic.  The theories imply that under growing economy with stable interest rates and increasing corporate earnings will result to long-term rise in stock prices.  As a result, the investment in St. George will gain from short-term dividends as well as long-term multiplicity of investments due to firm growth.  However, when stage II is off, selling or holding through diversified portfolio can save the economic impacts to share price.  In whatever situation, the investment will gain by simply following the economic indicators which serve as the popular basis of the market in its investment decisions.         Bibliography Attachments Attachment 1: Economic/ Stock Price Cycle ( 2000 p. 33)   Attachment 2: Australia VS USA Bonds ()     Attachment 3: Inflation and Wages ()   Attachment 4: Household Data and Retail Sales ()     Attachment 5:  Stock Market Performance from 2004-2006       Attachment 6: Dividends to Earnings per Share Comparison ()     Attachment 7: St. George Share Performance and S&P/ ASX 200 Index () Credit:ivythesis.typepad.com

FINANCIAL INSTITUTION AND INSTRUMENTFS

Introduction In an economics point of view, excessive stock market speculation is an inefficient way to allocate resources s...