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Bus329 Investment Analysis

Essay by   •  May 9, 2019  •  Case Study  •  3,156 Words (13 Pages)  •  28 Views

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ELECTRONIC ASSIGNMENT COVERSHEET

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Student 1

32781069

Dicson

Student 2

32919802

Shikha Gungah

Student 3

33064029

Loic Munso

Student 4

32912209

Brogan Worwood

Unit

BUS329: Investment Analysis

Student submitting

Full name:

Signature:

Assignment

Comparative analysis of performance of firms & investment decision

Tutor

Kamrul Hassan

Student’s Declaration:

  • Except where indicated, the work we are submitting in this assignment is our own work and has not been submitted for assessment in another unit.

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We are aware that we are making this declaration by submitting this document electronically and by using my Murdoch ID and password it is deemed equivalent to executing this declaration with my written signature.

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Start your assignment on the next page


A COMPARATIVE ANALYSIS OF FIRM PERFORMANCE: AN INVESTMENT DECISION


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Contents

Executive Summary        2

Introduction        2

Identification of the Issue        3

Introduction to Insurance Australia Group (IAG)        3

Introduction to AMP Limited        3

Purpose of the Analysis        3

Key Issues        4

Leverage        4

Asset Utilisation        4

Liquidity        4

Profitability        5

Cashflow        5

Ratios and Analysis        5

Leverage        5

Liquidity        6

Profitability        7

Asset Utilisation        8

Cash Flow        9

Recommendation        10

References        11

Executive Summary

The purpose of this report is to analyse and compare performances of two companies; IAG and AMP, using financial ratios. IAG is a major general insurance company in Australia and New Zealand (Insurance Australia Group 2019) and whilst also dealing in this industry similar, AMP does business in other areas such as wealth management, superannuation, insurance and banking advice (Australian Mutual Provident Society 2019).

The report discusses ratios used in industry, and their usefulness in terms of application in real-world situations. Key issues that need to be addressed are briefly outlined. This mainly centers around the issue of choosing the better firm to invest in.

After this, financial ratios regarding both firms’ leverage and asset utilisation; as well as profitability and liquidity are calculated. It’s also necessary to analyse cash flows to get a better overview of the firm fund levels, and to identify sources and investments of cash.

Once determined, ratios are compared both on a basis of the firm’s individual performance over time, to other firms and to industry averages.

After completing these imperative calculations, it was found that it would be better to invest in IAG than in AMP.

Introduction

In order to make certain investment decisions, it’s essential to compare financial information of a firm with another business in a similar industry, or to itself over time. To do this, information needs to be compiled and critically assessed, so as to create a clearer picture of the firm’s current performance. One way to achieve this is through ratio analysis (Bodie, Kane and Marcus 2018, 618-619).

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