OU- MAY- 090518- 0759PM- Assignment
Thc principles of finnncinl markets helps to facilitntc thc according. scttlcmcnt and clearing of financial and inonctan transactions This hclps in strengthening thc industries and also hclps to forecast the financial stability of the companies under the same industry’ The chosen companies falls undcr thc samc indiisty’. Thc Cochlcar limitcd company and CSL limited compare falls under the healthcare industrr. If this companies are not managed properly. can pose remarkable risks to the stem of finance. Although the companies performed well throughout the crisis pcriod rclatcd to finance ii hich happcncd rcccntly. The market rclntcd to financc plan s x’ital rolc in the development of the economy of the counter For economy ”s general health. application of principlcs of financial market is cxtrcmclj i’ital For opcrating under a propcr busincss cyclc both thc companies reqiiircd to apph thc principlcs of thc financial markct. The inflation rntc and thc GDP of tlic counts' .under which both the companics arc listed. i 'ill impact thc functionin g of thc actii’ities of thc business.
2.0Top tion n analysis
(a} Analysing thc overall economic environment of both the co• i›anies: Cochlcar is a grow ing compare Therc » as 12 % grow th of profit for first half of thc ycar
The Coclilear limited company makes considerable efforts for reducing » aste and the use of clectricitj . This compan; cnsurcs thc rccjcling. reuse of ii’aste products. Cochlcar limited company manufactures, designs and supplies the Hybrid electro acoustic implant, Baha bone conduction implant and Nucleus cochlear implant.
CSL liinitcd compare performs ii cll undcr thc factors rclatcd to protcction of consumcr. changes in tax legislation and insurance inaiidatcs. According to Fang ct o/ (2015, p 160), CSI limited company is considcrcd as thc lcadcr in global biotech CSL limited company manufactiircs drugs that coi’crs a third of thc market As cxposcd collcctii’cly. CSL nct ii orth prcscntlj is tcns of billions. Tlic CSL limited coiiipany is largcst inanufacturcr of drugs undcr healthcare industn to rccoi’cr mam paticnts suffcring from hcart atiack all oi’cr thc globe
(b) Consiilering how changes in forecasting in economic funilamenlals will impact on
companie s i›ciJormance in thc industry:
Changcs in forecasting in economic fundamentals has impacted highh on both thc companies operating under the same industry’. The cycle of business in ix'liich the company operates indicates thc changes in forccasting cconomic fiindamcntals. The major ini’cstincnt arcas of the coinpanics arc iinpactcd bi’ cconoinic fundamentals such as inflation rate and intcrest rate. Thc interest rate ii hich is 1.5 % in Australia also impacts the performance of the companies The inñahon ra+u of thc connti as compared to the previous Scar is 1.97% which lnCutncts the perfonnance of the companies under same industn The arious indicators and stages in business such as the GDP grow th rate is also an economic fundamental ii hich ii ill impact the companies performancc undcr the same industn According to Joncs e/ al (2015. p 1). the doc ntiim in economy and recession may affect both the coiiipanies under same industn Amending the forccast and compensating thc alteration of possible changcs is important to ai’oid the potcntial problems related to thc flow’ of cash of the companies.
(c} Demonstrating the current interest rate of both the companies:
The ciirrcnt interest rate of CSL limitcd company is 5 3% ii hereas thc current intcrest rate of Coclilear Limited company is 4 % Therefore, it indicates that Cochlear lirrhted company has a
loci cr rate of intcrcst as compared to CSL limited company According to Montes c/ o/. (2017. p 2fi), Cochlear limited company' liar ing lo» er rate of interest stimulates the gro» th of economy bctter than CSL limited compare . The lo»’cr rate of intcrcst of Cochlcar company makes it casier and chcapcr to borro»’ monc; for dci’clopmcnt of it business actin itics On thc othcr hand. the CSL limited company hat ing slightly higher rate of interest as coiiipared to Coclilear » ill not bc able to borrow’ monc; in a cheaper ii ai .
(d) Demonstrating the current s’aIue of the SAUD of both the companies:
The current i alue of $AUD of Coclilear limited company is $164.25 and the current alue of
$AUD of CSL limited company is $ l5•9 54 Thc diffcrcncc bctii ccn thc i’aluc of the $AUD of both the companies undcr the samc industw' has been demonstratcd Both tlic compaiiics listed undcr thc Aincrican StocL Exchangc (ASX) show’s unconncctcd i’aliic of $AU D. The differcncc in i’aluc of $AUD of both thc companies under same indiistn’ is $4.71.
(c} Currcnt GDP :
The current GDP of thc countn’ rcprescnts 1.94 % of thc total economy of the ii orld. Thc current GDP grow th of Australia amounted to $1 C›9 trillion. Tlic GDP grow th rate of thc counts' ii ill impact the performance of both thc companies under the same industtr
Dcmonstrating the inflation rate
The inflation rate of the Australia, under i 'hich the Cochlear company and CSL company is listcd. hai’c an inflation ratc of 1.97%. This inflation ratc of thc countn’ ii ould affcct the pcrformancc lci’cl of thc countries ii’hich opcratcs iindcr thc same indiistn’.
The economy in s hich the business cycle is currently operating in:
The business cycle under which both Cochlear limited company and CSL limited company operates under the industry’ that manufactures equipment related to health care and proc ide or supply serf ices related to health care. According to Eshraglii ef of. (2017. p 315), the companies opcrates under thc business ci cle is hich focuses on distributing facilitics related to health carc. The cycle of business, in ii hich both the companies operates under the same industn’. in olves dei’elopinent. inarkcting and researching of biotcchnology and pharmaceutical products. Thc coinpanics also applics thc principle of financial inarkct under thc ci cle of business in ii’hich it operates
The current financial status of both Cochlcar and CSL limited company is at good position, Be preparing the balance of both the companies for tu’o consociiti c i cars it has been analysed that the total assets › alue of both the companies differs to a great extent despite of falling under same industry , With the help of balance sheet the non current liabilities and current liabilities of both the corrlpanies has becn analvscd. After calculating tlic total liabilities it has becn analj scd that the total liabilities of Coclilear company for t» o jears is $1.1015.18 and of CSL limited company is $10954,4. According to Chubb cr al. (2017. p, 2300), the difference in the liabilities of both the companies is also observed in the balance of the companies.Under the current assct calculation both both the companies. cash and cash equii’alents. trnde and other receii’nbles, current tax assets and many other itcms has been calcnlatcd, Under thc non current assets intangible assets. propenj . plant equipment and other items has been calculated.The current assets and current liabilit@s of thc compan@s tindcr thc sainc indiisty’ has bccn analj scd to dctcrminc thc total asscis of both the compnnics. Thc currcnt liabilitics and thc non currcnt liabilit@s of thc company
has also bccn nnalj scd for both thc companies to dctcrminc the total liabilities of the companies.
Last,lj by preparing the balance sheet the net assets of the companies and the total equity of both
thc companies has been analyscd which short s the financial situation of both thc companies
(b) Consiilering accounting ratios of both the companies:
Thc accounting of ratios for both Cochlcar limited and CSL limited compare has been analyscd The current ratio analysis of Coclilear company for the year 2017 and 20.16 amounted to 1.090345021 and 2.162596575 rcspcctii’clj . Thc current rntio of CSL limitcd company for thc ycar 2017 and 2016 amounted to 2.844070386 and 2.777939464 rcspoctii’clyHcrc thc difference in the ratio bet» ecu both the companies has been aiialj sed The e quity ratio and return on cquity ratio of both thc compnnics is different. Thc cquity ratio of Cochlcar company is positively amounted » hereas the equity ratio of CSL limited slio» s me gatii e amount This defines that the financial position of Cochlear company is better ass compare to CSL limited company According to Dimoi’ski e/ al (2016. p 18). thcrc is slight diffcrcncc in thc nct profit and gross profit ratio for both the companics that has been aiialj sed in the statemcnt of ratio analysis. Thc assct tiirnoi’cr ratio of both the coinp;inics also short s diffcrcnt i’aliics ii’hich indicates the differencc in financial position of both thc companies
c} Measuring the performancc of thc firm of both the co•i • nies:
The income statement of both the companies has been prepared for analysis g the perfonnance of Coclilear ltd and CSL limited company. According to Erel ei o/. (2015, p.2S'7). the rei’enue of both the companies has bcen analj scd in thc income statcment After calculating the total operating profit for both the companies, the gross profit has been analysed by deducting the rei'enue from the cost of salcs The operating profit of both the company has also been analj sed by dcdiicting the various cxpenses of both the companies from the gross profit. In thc income statement of both the companies. the expenses incurred by both the companies includes research and development cxpenses, selling and marketing expcnses and gencral and administrative
expenses. The finance cost of the compan,y the finance income of the coitipany and the gain on
acquisition of the company under the saitie mdustry has also been analj sed to deteritiine the profit before interest and tax .Lastly. the net profit of the company has been analj sed by deducting the tax expenses from EBIT. Therefore. the net profit that has been analysed in the statement of income show’s how’ differentl both the companies are performing or cary’ing on its business actii’ities under the same indiisty’.
The Cochlear limited and CSL limited companies under the same industry could taLe steps to reduce the rate of interest to entrance its or erall economic structure
+ The company under the same could dei’elop policies to reduce the rate of inflation so that the companies don't have to suffer from high cost of doing or cam, ing on its business.
+ The application of the financial market principles could be done by the companies for the development of the economy structure of the overall business structure that falls under the same indiisty’.
Thc companies under the samc indiisty’ could apply steps to rcdncc risk in the sj st@n of finance This could be done by the companies to cam on the functions of the business in a propcr ii a; and smoothly.
Thc compare could kcep check on the ratc of inflation of thc country’ tinder ii hich it is listed The coinpail could do so to detennine the cost under which the companies i ill be able to opcratc its business functions and actii’itics
Based on the analysis of ratio and analysis done on the statement of financial position and statcmcnt of financial pcrfonnnncc it has been obscri’cd that both thc companies undcr thc samc industry operates in different ii’ay The interest rate of both thc companies has bccn considered in this project for both the chosen companies to deteriiiine the or eraII economic structure of both companies It has also bocn obsG1n’ed that the current inflation ratc and the currcnt GDP of the county under » hich the companies are listed also impacts the performance of the companies under thesame industrr
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