Part 2- Company Research/Graphs/investor Information
Commonwealth bank
Newcrest Mining Limited is a gold mining company is in the Resource sector. It deals with mining of gold.
Managing directors name, Greg Robinson.
Managing Directors share.
Total assets for the year 2010 was $6,334
Dividends given- 20% per share for the year ended 30th June.
Numbers of employees are over 16000 in all the countries the company operates in.
Total share price was $1,762,200
It is in the service provider sector and financial services to the people of Australia. These services are like offering of loans, credits, managing of accounts etc
Managing director and chief executive officer is Ian Nerev.
Dividends given- $1.37 per each share.
The total shares are about $178,000,000.
(commonwealth bank 2012 and Newcrest mining limited 2012).
The selected companies are Commonwealth Bank that falls under the financial sector and Newcrest Mining Limited that falls under the resource sector. Newcrest Mining Limited is a gold mining company and has most shares in the mineral sector in Australia. In June 2011, the company recorded a market cap of 28,864 million US dollars falling in the third place after BHP Billiton and Rio Tinto who took the first and second position respectively. The commonwealth Bank ranked among the top 100 best financial institutions in June 2011. The financial sector forms the biggest industry in Australia creating a very stiff competition among many financial institutions in Australia. At the closing of business on March 2nd 2012, Commonwealth recorded a share price of $20,161 while Newcrest Mining recorded a share price of $15,210 (ASX, 2012).
Commonwealth Bank:
Newcrest Mining:
(C). the commonwealth bank’s close price increases with time as seen in the graph. The graph curves by increasing from March 2012 to May 2012. However, the Newcrest mining limited’s close price decreases with time. It is at its peak in March 2012 but curves slightly down as it reaches May 2012. Therefore, the two companies contrast their close price trend with time.
The main reason why people invest is to get into an investment trend, take risks involved in investing, and keep a follow-up of the share prices. Commonwealth Bank of Australia has the highest number of shareholder in Australia’s financial sector that gives it a chance to have the highest share prices. ASX gets most of its revenues from financial and resource sectors. Newcrest Mining Limited specializes in gold mining allowing it to fetch a lot of money from the sale of the precious stones. Looking at the financial trend of ASX from March to May 2012, ASX traded a lot of shares from different companies in Australia. From March 2nd, the share market has shown some improvement especially in the financial sector due to increased currency value. On 2nd March, Commonwealth Bank of Australia closed at share value of $49.12 compared to that of $52.62 on May 4th. On the other hand, Newcrest closed at share value of $32.57 compared to the previous value of $25.65.
The value of share portfolio can be maximized through ensuring the investors know the importance of trading with their shares and encouraging people to buy shares from a given company. In addition, share portfolio value assists in improving many businesses and helps them compete among each other both locally and internationally. Understanding the shareholder’s interest is of considerable importance as it gives a company an opportunity to offer what consumers need and in a precise manner (Maureen, 2005).
(D).
Commonwealth Bank:
Profit = 52.62 - 49.12 = 3.5AU$ Number of shares: 100
Total Profit = 3.5*100 = 350AU$
Newcrest Mining:
Profit = 25.65 -32.57 = -6.92AU$ Number of shares: 120
Total Profit = -6.92*120 = -830.4AU$
(E).
Buy more shares of Commonwealth Bank of Australia. CBA has the highest number of shareholders in Australia to support and give more opportunities to increase the share price to ensure more profit in the near future. We can buy more shares now with cheaper share prices and sell later.
Hold on the shares of Newcrest Mining Limited for now, the published results from ASX as of May was not looking good, with the share price tendency which kept dropping. Therefore, at this stage, we will hold on the shares and hope for the best.
Part 3- Identification Of Key Financial Data and Ratio Analysis
(A)
Identification of Key Financial Data:
Commonwealth Bank
Newcrest Mining
Revenue / Sales
$46,215 million
$4,102 million
Interest Expense
$24,697 million
$334 million
EBIT
$33,754 million
No data
Net Profit Before Tax
$9,057 million
$1,300 million
Net Profit After Tax
$6,410 million
$966 million
Current Assets
$500,057 million
$1,542 million
Total Assets
$667,899 million
$12,373 million
Current Liabilities
$401,147 million
$817 million
Total Liabilities
$630,612 million
$1,840 million
Total Equity
$37,287 million
$10,480 million
(B) This means that the companies are making profit since the total value of assets exceeds that of liabilities therefore resulting in more income.
Ratio Analysis on Commonwealth Bank of Australia:
Ratio Analysis on profitability:
1. Gross margin = Gross profit / Sales * 100 =$33,754 M / $46,215 M * 100 = 73.03%
2. Net profit rate = Net Profit / Sales * 100 = $9,057 M / $46,215 M * 100 = 19.59%
The company is in profitability, the net profit rate is nearly 20% of sales.
Ratio Analysis on liquidity:
1. Current Ratio = Current Assets / Current Liability = $500,057 M/ $401,147 M = 1.24:1
2. Liquid Ratio = Quick Assets / Current Liability-Bank overdraft
= $500,057 M/ $401,147 M = 1.24:1
Ratio Analysis on Newcrest Mining:
Ratio Analysis on profitability:
1. Gross margin = Gross profit / Sales * 100
The calculation for the above ratio is not available due to unavailable data for EBIT.
2. Net profit rate = Net Profit / Sales * 100 = $13 M / $4,102 M * 100 = 0.31%
The company is in profitability; however, the profit is only counted to be 0.31% of the sales. The company should increase its sales to ensure it is satisfactory on the success of the business and its operation.
Ratio Analysis on liquidity:
1. Current Ratio = Current Assets / Current Liability = $1,542 M/ $810 M = 1.90:1
2. Liquid Ratio = Quick Assets / Current Liability-Bank overdraft
= $1,542 M/ $810 M = 1.90:1
The company is in good liquidity condition as it can be quickly converted from other assets into cash. The liquid ratio is the same as current ratio, due to limited financial information and data provided, we assume that the company does not have any bank overdraft, and the calculation is the same as current ratio.
Activity ratios for instance: inventory Turnover Rate, Number of days inventory, Accounts receivable turnover rate are unable to be calculated at this stage due to limited information provided.
ASX, Commonwealth Bank of Australia(CBA): Newcrest Mining Limited (NCM).2012.
Retrieved 17th June 2012 from: http://www.asx.com
Commonwealth bank, corporate banking, 2012, retrieved on 17th June 2012 from http://www.commbank.com.au/
Commonwealth bank, market shares, 2012, retrieved on 17th June 2012 from http://www.commbank.com.au/
Lewis M.& Slack N., Operations Management: Critical Perspectives on
Business and Management. London: Routledge,2003.
Maureen, S. Maximizing shareholder Value: What are Shareholders’ Interests? CasePlace.Org.
2005. Retrieved 17th June 2012 from: http://www.caseplace.org/d.asp?d=2797
Newcrest mining limited, our operations, 2012, retrieved on 17th June 2012 from http://www.newcrest.com.au/
Newcrest mining limited, people and careers, 2012, retrieved on 17th June 2012 from http://www.newcrest.com.au/
Newcrest mining limited, market shares and shareholders, 2012, retrieved on 17th June 2012 from http://www.newcrest.com.au/
