FINC20019 Money And Capital Market Analysis

Table of Contents

Question:

By:

Explain how the Global Financial Crisis [GFC] had an important impact on 1) the stability of international financial markets, and economies, and 2) the regulatory responses that were implemented to stabilize the financial system.

b.

A disaster recovery plan and a disaster response process are two components of business continuity risk management.

i) Define business continuity management.

iii) Describe and briefly explain the key components of a disaster recovery plan process.

iii. Describe and briefly explain the key components of a disaster recovery process.

Bottom-up analysis focuses on the analysis and interpretation of accounting ratios, as well as other performance measures.

This approach can be viewed from two perspectives.

A. Evans and Partners, an investment advisory firm, provides private clients with specialist investment advice.

The firm’s senior investment analysts apply a bottom-up approach when analyzing share prices as part of their investment decision process.

i) Explain why Evans and Partners would use such an analysis.

iii) Discuss six accounting ratios that should all be considered in a bottom up approach model.

iii. Identify and discuss three additional performance measures that could be used.

A fundamental analyst is being evaluated by an investor.

An investor is looking for the best approach to structuring a portfolio of shares that will provide income returns and capital gains.

i) Compare the approaches and make a recommendation on which one to choose – top-down, bottom-up or both.

Argumentation should be supported by solid reasoning.

iii) This top-down approach involves an analysis of the local economic environment in which the company is located, as well as the economies of major trading partners countries more generally.

What makes an investor interested in forecasting these changes?

Although listing on a stock exchange is a desirable option for companies, there are many requirements, conditions, and costs involved in becoming publicly traded corporations.

Freelancer Ltd, for example, is one of the most recent public companies to list on Australia’s Securities Exchange.

a) Give a general overview of Freelancer Ltd. AND discuss the rights, responsibilities, and roles of shareholders, board members, and executive management of Freelancer now that it has been publicly listed. This includes the requirements for Australian companies applying for general admission to the ASX, the ASX profit and asset tests.

b) Describe the reasons for these rules and explain how they help to create a stock exchange that is efficient, protects the interests of listed entities, and maintains investor protection. What impact will these rules have on firm liquidity management and firm value?

c) Explain why continuous reporting is required and necessary within the ASX context.

Answer:

Introduction

Smith, 1973. Capital markets and money market are essential to the development and success of companies and countries.

This question will discuss the global financial crisis’ impact.

It will be discussed how the Global Financial Crisis affected the stability and financial markets worldwide.

The details of the disaster recovery procedures used by commercial banks will then be discussed.

The recovery process will include many elements and steps.

Analyse

Content

Capital markets include the markets of equity, company debt and foreign exchange.

Capital market is the market on which securities can be traded.

Two types of securities are common stock and bonds.

In order to increase capital, the government and monetary institutions provide long-term financial facilities.

Capital market consists of two parts: the market of stock and the market of bonds.

Public companies have the responsibility to raise capital through stock market training (Kose & Prasad 2010,).

Capital and money markets also include the wholesale and retail markets.

Investors and financiers can purchase the new stock in the primary market.

The company’s existing stock is traded in the secondary market.

The money market includes a variety of monetary institutions, as well as brokers for cash or advances.

These dealers are free to deal with cash and advances.

Participants in the money market receive cash advances for a specific time period to make all operations successful.

In the money markets, instruments of limited maturity can be traded.

The capital markets are for instruments of enduring maturity (Krugman 1979).

Money is the main item or medium for exchange.

Participants in the money market receive shorter-term financial services.

It is a part of the capital markets.

These two markets allow for the trading of a variety of monetary instruments.

Global market is a place where securities can be traded freely by different countries without issue.

Content

The global financial crisis that struck the world in 2007-2008 was felt by all countries.

The Global Financial Crisis of 2008, which was the worst crisis since the 1930s global disaster, was widely considered to be the most severe.

The financial crisis had a devastating impact on the economies of many countries.

This financial crisis began in 2007, when the subprime market for mortgages in the United States was at its worst.

The 2008 mortgage market crisis was the most severe crisis.

The global market was affected by this crisis.

The global downturn that followed this crisis was a result.

The Great Recession followed.

Also, the crisis of European debt was frequent.

The financial system as a whole was significantly affected by the global financial crisis (llen, 2010).

The US stock market and financial institutions were significantly affected by the Global Financial Crisis.

According to Dow Jones Industrial Average, the US stock market surpassed 14000 points in 2007.

In March 2009, this average was at 660 points.

After four years, this estimate reached its peak.

The Federal Reserve’s forceful strategy of numerical simplification promoted fractional stock market rescue (Allen Babus, Carletti 2009).

The policy maker Dow believes there is divergence between the Great Depression and the current market.

The market experienced a 50% drop during the depression.

The market experienced an extraordinary decline in 2007.

This Global Financial Crisis had a devastating impact on the entire financial system.

Global Financial Crisis also impacted financial institutions.

BNP Paribas’ liquidity position was severely affected in the UK by impassable withdrawals from funds of hedge.

Investors didn’t notice this at first.

This was later discovered by investors and financiers who attempted to release properties from highly leveraged monetary institutions.

Between 2007 and 2009, the banks of Europe & USA lost more than USD 1 trillion.

The banks of the USA and UK lost nearly USD 2.8 trillion between 2007-2009.

The loss of USD 1 trillion is likely to be suffered by banks in the USA.

Banks in the UK and Europe suffered losses of over USD 1.6 trillion.

International Monetary Fund predicts that the USA’s banks will suffer 60% losses.

Bank of England also suffered severe losses (Chang 2000 and Velasco 2000).

Content

The Global Financial Crisis caused significant losses for commercial banks.

Business continuity is the organization and engagement that ensures that a company can continue operations in severe crisis situations and can recover to a functional level within a reasonable time.

Commercial banks are at risk of losing their business continuity.

The business continuity process includes three key factors: resilience, contingency, and recovery.

The primary objective of risk management for business continuity is to ensure that a financial institution and its staff are prepared to respond to any activity that could disrupt aggressive business operations, as well as capable of efficiently rescuing those operations.

This includes all functions within the financial institution.

Insufficient or failed activities and procedures can lead to severe functional and monetary consequences (Brunnermeier 2001).

A recovery plan for disaster is a documented procedure or group of processes that are used to rescue and secure a company.

These plans and processes were created by the company.

There are many components to the risk disaster recovery process.

The first step is to analyze the risk factors.

Then, the recovery functions for the business are examined.

Strategies for resolving crises are developed.

Employees and workers are educated and trained according to the requirements of the strategies.

Tests are made and examined for disaster recovery strategies.

A maintenance plan is also prepared.

There are many steps involved in disaster recovery planning.

To recover from a crisis, planning is necessary.

The teams of recovery are responsible for the assessment and evaluation.

Direct recovery operations will be conducted by the required staff.

These strategies will be explained to the teams.

There are also backup plans for recovery.

The performance of the company is then evaluated thoroughly (Mbaye 2003).

Conclusion

After analyzing all data, it was concluded that money and capital markets are essentially important.

2008 saw the global financial crisis that had a significant impact on financial institutions and the financial system in general.

It is essential to have a disaster recovery plan.

To recover from a crisis, there are many steps and components that must be taken.

Introduction

Both bottom approach and top-down approach are important for funding and investment purposes.

Both approaches have the same goals and objectives (Biatov & Kohler 2006).

These approaches can be used to increase stocks and investments.

This question will discuss in detail the differences between top down and bottom up approaches.

There are many reasons why investors should choose top down or bottom up approaches.

In detail, the bottom-up approach model will demonstrate various ratios and performance measures.

Each factor is important, and the approaches will be explained in detail.

Content

Bottom-up approaches are essential to the success and development of a company (Hume and Sentence, 2009).

This approach examines the economic conditions and situation in detail.

Analyzing the entire market is more effective than focusing on a single factor.

To invest in a profitable company, each company is examined individually.

This approach focuses on the main and fundamental factors of the company.

In-depth analysis of the commodities, competitive position, earning potential, and industry status is done.

This approach focuses on the enduring prospects for growth and earnings estimations.

To determine the potential and growth of the company, financial ratios like liquidity ratios (profitability ratios), efficiency ratios and solvency ratios are examined in detail.

Analyzing financial ratios (Frankel & Rose 1996) allows for the measurement.

Content

Evans and Partners, a well-established advisory firm that provided expert advice on investment to its customers, is now a well-known company.

The company conducted a fundamental analysis to determine the share price.

Fundamental analysis is the assessment of a company’s financial reports, fitness, competitive market and rivalry position.

The company’s senior analysts use a bottom-up approach to fundamental analysis (Eisenhardt 1989).

This approach is preferred by investors because it allows them to fully understand the company’s financial situation.

Fundraisers focus on the fundamentals and basic aspects of the company by using a bottom-up approach.

Every aspect of the company is thoroughly investigated.

This analysis focuses on the micro and macro factors that will influence future changes in the share price.

This approach is being used by the company because it will focus on the company’s future prospects and potential.

Analysis of ratios will measure the company’s monetary and managerial performance, strengths, and efficiency (Tranter & Reynolds 2006).

Analysts will consider choosing stocks from corporations that have large percentages of involvement in a portfolio of investments.

Evans and Partners chose a variety of ratios for bottom-up analysis to examine the share price and potential investment.

Six different ratios will be used by the company in the bottom-up approach.

1. The current ratio.

This will determine the company’s ability to meet current obligations using current assets.

The quick ratio should be used second.

The quick ratio is a measure of a corporation’s ability to pay the current obligation using its quick assets.

The interest coverage ratio should also be considered (Madhavan 1992).

This shows how the corporation can manage its interest payments.

The fourth factor to consider is EBIT to total funds ratio.

This ratio indicates a company’s ability to profit from all assets.

The fifth factor to consider is the ratio of EBIT to long-term fund.

This ratio shows the company’s ability to generate income from fixed assets.

The ROE ratio should be used by the company.

This ratio indicates the company’s ability to make profit from equity.

These three performance indicators are important. They include the earnings per share ratio, price earning ratio, and price to tangible assets.

These ratios are used to assess the performance of a company, as they indicate its market position (Van & Horn 1975).

Content

Both a top down and bottom approach are essential for making investment decisions.

A fundamental analysis is where a financier evaluates the effectiveness of each approach.

This investigation is used to determine how to structure the portfolio.

To balance the portfolio, a top-down approach is used to analyze multiple industries and sectors.

By assessing the risk of inner functional hazards, we can assess how they influence our investment decisions.

The economic variables are compared to determine the difference.

Individual stocks are examined in the bottom-up approach.

This approach focuses on the managerial and professional competence of corporations.

This approach uses a variety of numerical models to evaluate the risk factors (Cline, 2000).

Both are preferred.

Both approaches are required in order to create a well-diversified portfolio.

Top down, macro factors are assessed and analyzed.

Analyzing the growth rate of large global communities and their reactions to government policies is possible.

Analyzing the rate of exchange between domestic and international nations, changes in the balance and payments, interest rates, movements in the balance, interest rates, development of prices, and rates of inflation is possible (Berman 1978).

In the bottom-up approach, financial statements, ratios and managerial performance are examined.

Analyzing performance indicators, changes in core management, and data about the values and mission of companies is possible.

It is recommended that investors use both the top down and bottom up approaches to create diversified portfolios to maximize efficiency and achieve their goals.

It is advantageous for future investment prospects if an investor analyses diverse economies from the top down.

Investors analyze changes in the performance of different economies and restructure their portfolio to reflect these changes.

Performance of the industry also impacts company performance (De Santis & Imrohoroglus 1997).

Therefore, it is important to analyze the industries.

Conclusion

Based on the above analysis, both approaches can be considered significant.

Both of these approaches offer sufficient benefits for investors.

These approaches provide sufficient benefits to investors.

Introduction

Companies and corporations in Australia must register on ASX (Lee & Mark 1991).

This is essential for the success and development your company.

This report will explain the requirements for ASX admission.

This report will discuss the roles and responsibilities that management of Freelance Ltd has.

These registering requirements will have an impact on the share price.

In the final part, we will discuss reporting requirements.

Content

Freelance Limited, an Australian company, is located in Australia.

The company’s headquarters is located in Australia.

Freelance Limited’s main goal is to offer an online outsourcing marketplace.

The company operates in two areas: online marketplace and online payment services (Laeven & Fabian 2013, respectively).

Online payments include Business of Escrow.

Employers recruit for different segments of the outsourcing marketplace segment.

To be able to register on ASX, the company must comply with various registration and legislative rules.

The shareholder has the primary right to vote in general meetings. Directors of the company are elected through shareholders’ votes.

The shareholder is a owner of the company and cannot take part in its activities.

The board of directors is responsible for setting policies and strategies that will achieve these goals.

They must recruit and give the resources necessary to achieve these goals.

Directors are responsible for evaluating the company’s performance.

They assess whether the company’s objectives are being met.

They assess activities to ensure that they are in the best interests of all stakeholders.

The board of directors elects the executive management group.

This group of management is responsible for achieving specific goals and strategies through daily operations and activities.

The board of directors is accountable to the stakeholders (Fisher 1933).

Directors are responsible for the management (Reinhart & Reinhart 2009).

Content

Listing requirements for ASX admission directly affect the value and liquidity of the company.

These rules are also part of the efficient stock exchange.

To be eligible for admission, the company must have at least 300 shareholders.

Each shareholder must have a minimum USD 2000 value.

Two stock exchanges can be registered for the company (Schularick 2012 and Taylor 2012).

It must comply with the rules and regulations of ASX.

For registration on the ASX, it is essential to pass both the Profit Test and Asset Test.

A company must have AUD 1.5million of working capital if it is to be registered under the assets test.

If the company doesn’t have this working capital, they must maintain AUD 1.5million of working capital after the first financial year.

This amount can also include the budgeted revenue.

If company is admitted under the profit test (Munga 1974), no working capital is needed.

These rules impact liquidity because companies must maintain AUD 1.5million of working capital as part of the asset test.

The net value of tangible assets must be at least AUD 4,000,000.

Market capitalization should not exceed AUD 15,000,000.

Because the registering rules have an impact on stock prices and investor interest, companies must maintain a profit of AUD 1,000,000 from constant activities over the past three years. This is called the profit test.

Companies must maintain a profit of AUD 500000 from constant activities for the past year (Schwartz 1988).

Content

ASX rules require companies to report on a regular basis.

Companies must report on a regular basis.

Companies are required to provide financial reporting on a half-yearly basis and annually.

These reports are required for investment and managerial decision making (Tymoigne & Wray 2009).

This requirement is critical for managers and investors to be able to make informed decisions.

During the year, errors and mistakes can easily be highlighted.

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