Assignment Outcomes:
1. Demonstrate a detailed understanding of the main concepts of finance.
2. Use financial ratios to measure and evaluate a firm's liquidity, profitability, market value and asset utilization.
Assignment Tasks:
Task 1: Summary Table:
This table is to be completed after questions 2 & 3 are answered. It is to provide a summary of your findings in one table.
Provide a summary table with all the ratios side by side like the below:
Ratio APPL GOOGL Industry Average S & P Average.
Task 2: Ratio Analysis:
Use 5 different ratios/indicators from the ones you learned in class (or others you may have found) to try to compare and explain the two companies (Apple & Google), their market cap and their share price growth/decline. Present answers in a table format.
Ratio APPL GOOGL Ratio Analysis.
Task 3: Cross-sectional Analysis
Below are industry averages. For the ratios, you chose above, compare Apple (Appl), Sector and S&P500 ratios.
Compare the two companies performance against sector and S&P index; provide an overall cross-sectional analysis. Present answers in table format as below: Ratio APPL Industry Average S & P Average Cross-sectional Analysis
Task 4: Dividends and Market cap
Apple has a higher market cap, higher market revenue and pays dividends. Apple's share is selling for USD 174.97 per share (2/March/2019) while Google, does not pay a dividend and is about USD 30billion less in market cap yet selling for USD 1,148.52 per share (2/March/2019). Why is this? Has Apple always paid a dividend? Why? In your explanation, describe the different ways a person can make money purchasing stock and how and why this may differ between the two companies.
For questions 5,6, 7 & 8 Calculations to be submitted via the excel sheet. Ensure only the FINAL answer is on the word document & any justification that is needed for question 8.
Task 5: Calculate the monthly return (% change) of each stock.
Task 6: Calculate the monthly standard deviation for each stock.
Task 7: Calculate the coefficient of variation (CV) for each company.
Task 8: Using the stock valuation models, calculate the stock price that Apple (APPL) should be selling at and determine if it's overvalued, undervalued or selling at the valuation price. Choose a closing price for (APPL) at any date, but you should show a screen shot for that price. Justify the model you will choose and discuss factors that cause the difference between the valuation price and the market price.
Task 9: If you had to invest in only one of the two companies, which company would you pick? There is no right or wrong answer, but you must justify your choice with reference to each stock's ratios (and any other research you may have done) by explaining; you should refer to answers given in previous sections as well:
- Your risk tolerance (risk-seeking or risk-averse)
- Your investment timeframe (short term or long term)
- Your investment goals (do you want to beat an index or reach a certain amount of money?)
- Stock's potential in the future. (Growth or Fall)
- Personal reasons (justify).
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Attachment:- Financial Concepts.rar