Bus329 Investment Analysis
Essay by Shikha Gungah • May 9, 2019 • Case Study • 3,156 Words (13 Pages) • 1,810 Views
ELECTRONIC ASSIGNMENT COVERSHEET | [pic 1] |
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 |
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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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