Opportunities For Investing In The Australian Market – A Study

Top down analysis

This entire study has been done to identify the opportunities for an investor into the Australian market. Through this study, it has been found that the Australian market is performing well in the current scenario. Various tools are available into the market to evaluate the best security into the market. In this report, fundamental analysis has been opted. Fundamental analysis is a study in which various stocks are evaluates on the basis of their worth in the market. For analyzing the worth, the final statements, industry situation, company situation, economical condition etc has been evaluated. Further, for the conduction of fundamental analysis, two methods of fundamental analysis have been evaluated. One is top down analysis and other one is technical analysis.

In this report, various tools of fundamental analysis such as bottom up analysis and top down analysis has been performed to identify and manage the performance of the country, industry as well as the firms. In this report, firstly the Australian market has been analyzed. Further, banking industry has been evaluated for this report. and two firms of the industry which are commonwealth bank Australia and ANZ bank Australia has been taken into the consideration. In this report various aspect of the industry has been analyzed such as fiscal policies, inflation, GDP, economy performance, environmental condition, economical condition, ratio analysis, income statement, cash flow statement, ratio analysis, balance sheet analysis, DU Pont analysis etc has been evaluated (Sarsby, et al, 2014).

The top down analysis is the tool of fundamental analysis. In top down analysis, an industry and entire movements are analyzed which have taken place into the security market or the changes into the particular industry’s prospective rather than the individual security. This analysis mainly depends upon the assumption that an individual company of an industry cannot perform well if the industry in which company is operating, not performing well. Further, it has been found that this is totally opposite to the bottom up analysis. For analyzing the best result through top down analysis, it is required for the analyst to make better situation. And for it, various tools must be analyzed in this report. Top down must be conducted according to the industry situation and the prospect of the company. So analyst must be aware about the situation of the industry (yasin, 2014).

For preparing this report, banking industry has been taken into the context and further, the two firms of the company are commonwealth bank Australia and ANZ bank Australia (Seng & Hancock, 2012).  Top down analysis has been done over both the companies of banking industry which are commonwealth bank Australia and ANZ bank Australia to make a better decision about the investment position of the company. In this report various aspect of the industry has been analyzed such as fiscal policies, inflation, GDP, economy performance, environmental condition, economical condition etc has been done (krnatz, 2016).  

Banking industry of Australia

This study has been conducted to identify the individual security performance in the banking and financial industry. Top down analysis express about entire aspects which are somehow related to the security such as the performance of the company, new policies and strategies adopted by the company, management strength of the company, operations and business functioning of the industry etc. this study has been performed for the investors so that they can make a better decision about the investment into the particular security.  

The Australian market is performing well in the market and the impact of better performance of the market is directly linked with the Australian banking industry. It has been evaluated that the banking industry’s growth is enhancing rapidly. Further, the last few years data have been analyzed of banking industry and it has been found that the banking industry is enhancing rapidly. Banking industry is enjoying a great experience in the market and thus the industry is a good option for the investors to invest their money (Nelson, Balakrishnan & Sidhu, 2012).

The above table has also been evaluated and it has been found that the Australian banking industry is earning more profits than any other company worldwide. The Australian market has also left the China, UK, US etc countries behind and reaches on the top. Currently, the profits earned by the banking industry of Australia are 2.9% which is more than any other country’s profits. The performance of the banking industry depict about a better investment opportunity into the banking industry of Australia.

Further, the Australian market has been analyzed to identify the future changes of the industry as well as the performance of the industry. Through the reasrch over the banking industry, it has been found that the industry is performing super in current scenario and future prospect of the industry is also depicting about a great industry situation. It has been evaluated that the risk and return of the industry is managing effectively through the companies and thus the industry would grow further rapidly (Zhang, Fonslow, Shan, Baek & Yates III, 2013). Currently, the Australian banking industry is on the top in terms of profits and the policies and strategies of the company are also in favor and so the industry’s performance and profitability would enhance in near future (Nelson, Balakrishnan & Sidhu, 2012).

 `further, various other articles and news have been studied and it has been found that the banking industry is one of the top profitable industry of the Australian market and the GDP ratio of the industry is also higher and thus it could be expressed that this industry would offer high return to its investors with less situated risk (Benchmark, 2017).

Future projections

Banking sector of Australian market is attractive and managing the operations and performance quickly. It has also been evaluated through this study that the industry would perform effectively in the future.

In addition, Australian market’s inflation rate has been evaluated to analyze the performance and the investment opportunity into the Australian market as well as the banking industry of Australia (Seng & Hancock, 2012). Inflation rate of a country depict about the changes into the prices and economy. Through the below given chart, it has been found that the inflation rate of current quarter has been reduced. This has been reduced due to various government policies. Thus the industry is a good option for the investors to invest their money

In addition, Australian market’s GDP rate has been evaluated as well as the banking industry contribution has also been analyzed to identify the performance and the investment opportunity into the Australian market as well as the banking industry of Australia (Seng & Hancock, 2012). GDP rate of a country depict about the performance and profitability of the economy. Through the below given chart, it has been found that the GDP rate of the country is quite impressive and the Australia is on the num of 13^th in the top world’s largest economy (Luo, Ghassemlooy, Le Minh, Bentley, Burton & Tang, 2014). This has been enhanced due to various government policies and performance of the industry. Thus the industry is a good option for the investors to invest their money.

As well as it has also been evaluated that the banking industry’s contribution in the total GDP of Australia is around 10% which is quite higher and thus it has been found that this industry is a good option for the investors to invest the amount and manage the return and risk situated with the investment.

Lastly, Australian market’s fiscal policies have been evaluated to analyze to identify the performance and the investment opportunity into the Australian market as well as the banking industry of Australia (Seng & Hancock, 2012). Fiscal policies of a country depict about the various changes into the policies of the company. Through the various studies, it has been found that the fiscal policies of the country is in the favor of the Australian market and currently the changes which have been made by the government has opened the various opportunities for the FDIs (Hajkowicz, Cook & Littleboy, 2012). This has been enhanced due to various government policies and performance of the industry. Thus the industry is a good option for the investors to invest their money.

Inflation rate

As discussed, the bottom up analysis is the tool of fundamental analysis. In bottom up analysis, an individual stock or security is analyzed rather than the entire movements which have taken place into the security market or the changes into the particular industry’s prospective. This analysis mainly depends upon the assumption that an individual company of an industry can perform well whether the industry in which company is operating, not performing well. Further, it has been found that this is totally opposite to the top down analysis. For analyzing the best result through bottom up analysis, it is required for the analyst to make better situation. And for it, various tools must be analyzed in this report. bottom analysis must be conducted according to the industry situation and the prospect of the company. So analyst must be aware about the situation of the industry (parker & Vansett, 2012).

For preparing this report, banking industry has been opted and further, the two firms of the company are commonwealth bank Australia and ANZ bank Australia.  Bottom up analysis has been done over both the companies of banking industry which are commonwealth bank Australia and ANZ bank Australia to make a better decision about the investment position of the company. In this report, income statement, cash flow statement, ratio analysis, balance sheet analysis, DU Pont analysis etc has been done (Lou, Zhang, Zhang, Yao & Xu, 2012).  This study has been done to identify the performance of individual security in the banking industry. Bottom up analysis depict about entire aspects which are directly or indirectly related to the security such as the performance of the company, new policies and strategies adopted by the company, management strength of the company, operations and business functioning of the company etc. this study has been performed for the investors so that they can make a better decision about the investment into the particular security.  

Ratio analysis is a study which tells the user about the various position of an individual company. This analysis is performed by the investors, companies and financial analysts to identify the position of the company in the market. In ratio analysis, 2 or more aspects of income statement, balance sheet and cash flow statement are compared to reach over a conclusion. For instance, current assets and liabilities are compared to identify the current ratio of the company. Basically, these ratios are calculated by the investors, companies and financial analysts to evaluate the company’s operational and financial condition as well as the strength and weakness of the company in terms of managing the final financial condition.    

GDP

ANZ bank Australia is one of the best banks in the Australian market. The management and performance of the company is quite impressive. Ratio analysis study has been performed over the company to analyze the operational and financial condition as well as the strength and weakness of the company in terms of managing the final financial condition (Morote et al, 2013). Following are the calculations of the analysis of ratios of the company:

Computation of ratio analysis
Liquidity ratio	2016	2015
Current ratio	3.600124613	5.750542206
Quick ratio	3.575364413	5.710978381
Working capital	4,96,603.0	5,51,975.0
Profitability Ratios	2016	2015
Operating Profit Margin	2.243513802	1.357443321
Net Profit Margin	0.338170833	0.40928708
Return on Capital Employed	0.1	0.0
Return on Equity	0.098740877	0.130871487
Return on Total assets	0.006240238	0.008418923
Capital structure ratio	2016	2015
Debt- equity	14.82325573	14.54491938
Efficiency ratio	2016	2015
Creditor turnover ratio	1.098434819	0.015646351
Inventory turnover ratio	2.265065409	0.019301994
Particular	2016	2015
ROCI	-263.8795987	-241.7157275

Through the above table, it has been analyzed that the performance of the company has been enhanced from last year in terms of liquidity, profitability, solvency and efficiency. The liquidity ratio of the company expresses that the company has reduced the current ratio to manage the resources. Further, the profitability ratios over the company express about the increasing profitability position of the company. Still the net profit of the company has been reduced due to various operational expenses. In addition, debt equity ratio has been evaluated which depict about the relation between the liabilities and assets. It depict that the debt and equity ratio of the company is almost similar from last year.

Commonwealth bank Australia is one of the best banks in the Australian market. The management and performance of the company is quite impressive. Ratio analysis study has been performed over the company to analyze the operational and financial condition as well as the strength and weakness of the company in terms of managing the final financial condition (Morote et al, 2013). Following are the calculations of the analysis of ratios of the company:

Computation of ratio analysis
Liquidity ratio	2016	2015
Current ratio	2.91616255	2.673539461
Quick ratio	2.883303411	2.641758711
Working capital	4,62,142.0	4,00,155.0
Profitability Ratios	2016	2015
Operating Profit Margin	0.380104681	0.369853372
Net Profit Margin	0.281042079	0.27058651
Return on Capital Employed	0.0	0.0
Return on Equity	0.157858021	0.175983674
Return on Total assets	0.010185644	0.010563904
Capital structure ratio	2016	2015
Debt- equity	14.49808989	15.6589613
Efficiency ratio	2016	2015
Receivable turnover ratio	0.050675078
Creditor turnover ratio	1.617127257	0.031456863
Inventory turnover ratio	2.174954909	0.028634582

(Morningstar, 2017)

Through the above table, it has been analyzed that the performance of the company has been enhanced from last year in terms of liquidity, profitability, solvency and efficiency. The liquidity ratio of the company expresses that the company has enhanced the current ratio to manage the operations and production of the company. Further, the profitability ratios over the company express about the increasing profitability position of the company. In addition, debt equity ratio has been evaluated which depict about the relation between the liabilities and assets. It depict that the debt and equity ratio of the company is almost similar from last year. Efficiency ratios have also been calculated and it has been found that the company has managed the entire resources to manage the working capital.

DU Pont analysis is a study which tells the user about the performance of an individual company. This analysis is performed by the investors, companies and financial analysts to identify the performance of the company in the market. In DU Pont analysis, assets of the company are evaluated to analyze the ROE. Book value of the assets is taken into consideration for it. It has been found that there are various factors which could influence the ROE of a company such as operating efficiency, financial leverage, assets etc. Basically, these DU Pont are calculated by the investors, companies and financial analysts to evaluate the company’s total profit in concern of the total equity of the company.  

Fiscal policies

ANZ bank Australia is one of the best banks in the Australian market. The performance and the profitability of the company is quite impressive. DU Pont analysis study has been performed over the company to analyze the operating efficiency, financial leverage, assets etc. (Morote et al, 2013). Following are the calculations of the DU Pont of the company:

Through the calculations, it has been evaluated that the return on equity of the company is 10% that means the total profit of the company in concern of total equity is 10%.

Commonwealth bank Australia is one of the best banks in the Australian market. The performance and the profitability of the company is quite impressive. DU Pont analysis study has been performed over the company to analyze the operating efficiency, financial leverage, assets etc. (Morote et al, 2013). Following are the calculations of the DU Pont of the company:

Through the calculations, it has been evaluated that the return on equity of the company is 16% that means the total profit of the company in concern of total equity is 10%.

Financial statement analysis is a study which tells the user about the performance, position, changes, profitability etc of an individual company. This analysis is performed by the investors, companies and financial analysts to identify the performance of the company in the market. In financial statement analysis, various aspects of the company are evaluated to analyze the performance, position, changes, profitability etc.

ANZ bank Australia is one of the best banks in the Australian market. The various changes have been taken place into the performance of the company. Financial statement analysis study has been performed over the company to analyze the performance, position, changes, profitability etc. Following are the aspects of financial data of the company:  

Financial Data of ANZ bank Australia
Particulars	Amount	Amount
Total Interest income	16,882	18,305
Total Noninterest income	10,562	11,210
Operating Profit/(Loss)	37452.0	24422.0
EBIT	37875.0	24848.0
Net profit	5709	7492
Current Assets	687595.0	668167.0
Quick Assets	682866	663570
Goodwill	4729	4597
Trade receivables/Debtors	597803.0	580769.0
Total Assets	914869	889900
Dividend Paid	4564	3763
Current Liabilities	190992.0	116192.0
Trade Payables/Creditors	8865	10366
Total Liabilities	857051	832653
Capital Employed	723877.0	773708.0
Long term loans	6,66,059	7,16,461
Shareholders’ Equity	57818	57247
Dividend per Share (DPS)	2.03	1.97
Earnings per Share (EPS)	1.96	1.89
Price per Share	10	10
Dividend per Share (DPS)	2.03	1.97
Earnings per Share (EPS)	1.96	1.89
Price per Share	10	11

Commonwealth bank Australia is one of the best banks in the Australian market. The various changes have been taken place into the performance of the company. Financial statement analysis study has been performed over the company to analyze the performance, position, changes, profitability etc. Following are the aspects of financial data of the company:

Financial Data of commonwealth bank Australia
Particulars	Amount	Amount
	AUD$ ‘000	AUD$ ‘000
Total Interest income	33,817	34,100
Total Noninterest income	16,882	18,305
Operating Profit/(Loss)	27497.0	27005.0
EBIT	12854.0	12612.0
Net profit	9504	9227
Current Assets	703323.0	639262.0
Quick Assets	695398	631663
Goodwill	7925	7599
Average goodwill	7762.0
Trade receivables/Debtors	695398.0	639262.0
Total Assets	933078	873446
Dividend Paid	5827	6200
Current Liabilities	241181.0	239107.0
Trade Payables/Creditors	9774	11105
Total Liabilities	872872	821015
Capital Employed	691897.0	634339.0
Long term loans	6,31,691	5,81,908
Shareholders’ Equity	60206	52431
Dividend per Share (DPS)	5.42	5.54
Earnings per Share (EPS)	5.39	5.29
Price per Share	10	10
Dividend per Share (DPS)	5.42	5.54
Earnings per Share (EPS)	5.39	5.29
Price per Share	10	11

As discussed above, the entire study has been done to identify the opportunities for an investor into the Australian market. Through this study, it has been found that the Australian market is performing well in the current scenario. Various tools are available into the market to evaluate the best security into the market. In this report, fundamental analysis has been opted. Fundamental analysis is a study in which various stocks are evaluates on the basis of their worth in the market. For analyzing the worth, the final statements, industry situation, company situation, economical condition etc has been evaluated. Further, for the conduction of fundamental analysis, two methods of fundamental analysis have been evaluated. One is top down analysis and other one is technical analysis.

Fundamental concepts are the best concept to identify the best stock in the market and it is also useful to analyze the various conditions and situation of the company. In this report, various tools of fundamental analysis such as bottom up analysis and top down analysis has been performed to identify and manage the performance of the country, industry as well as the firms. In this report, firstly the Australian market has been analyzed. In addition, the industry of banking has been evaluated and lastly the performance has been done over the two firms which are operating its business functioning under the industry of banking. More, various micro and macro factors have been analyzed for this report.

Through the above research, it has been evaluated that the Australian market is performing rapidly and thus the banking industry’s performance is also enhancing rapidly. Further, it has been found that the macro and micro factors of the industry and companies are quite in the favor of the investors and thus it has been found that the investment into the banking industry would be more profitable for the investors.

More, it has been found that the commonwealth bank of Australia is performing well and thus the investors must invest into the commonwealth bank of Australia.

References:

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Morningstar, 2017. ABP property group. Retrieved from https://financials.morningstar.com/income-statement/is.html?t=ABP&region=aus&culture=en-US available as on 9^th Sept 2017

Morningstar, 2017. AMP limited, Australia. Retrieved from https://financials.morningstar.com/income-statement/is.html?t=AMP&region=aus available as on 9^th Sept 2017.

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