INVESTMENT DECISION

Investment decision



Case study - Talisman Energy

Introduction

The aim of investors is to generate returns on their invested capital in the stock market along with the protection. In this paper, we will advice Aunt Asia whether to sell or hold the shares of Talisman Energy through the analysis of the financial statements of the company, its comparison with the stock market and to its main competitors.

Discussion

History of company

Talisman Energy Inc (TE) is a Canadian company based in Calgary, Alberta. The company is in the stock index of S & P / TSX. Initially, the company was part of the British Petroleum (BP) company. In 1992, this company became the independent company under the name of Talisman Energy. The company promotes and sells crude oil. Talisman Energy involve in production, development, and exploration operations in North America, the North Sea, Southeast Asia, Australia, and North Africa.

Analysis of Financial Statements

Balance Sheet, Income Statement and Cash flows

Analysis of the balance sheet Income Statement and Cash flows will give the clear picture of Talisman Energy concerning the assts, liabilities and net worth which will help to know the financial operation of the company in a wide manner. Balance sheet which also termed as statement of financial position indicates the financial health of the company. While Income Statement tells about the operation of the company and Cash flow indicates the inflows and outflows of the company.

They offer a snapshot of the business health at a point in time. It shows the current or for the particular year review regarding the company assets owned by the company and liabilities the company owes. The importance of these financial statements is that, the investors can easily evaluate the current flexibility and liquidity of the company. Hence, it offers a future sophisticated analysis to the investors. Through these financial statements, the investors can calculate the different ratios and can assist the investors to manage their portfolio and make effective decisions. These ratios are important due to the credit worthiness which is seen by the bankers when giving loans.

The three major balances of the balance sheet that focuses on the current financial position and expected future performance:

Working capital

The need for working capital

The need for cash.

These three elements show the optimization of the company management and particularly the point the three basic indicators of corporate finance. The importance of equity i.e. shares capital and reserves in the balance sheet (by comparing the amount of equity to total liabilities. The importance of investments in production facilities in relation to total assets: by comparing the amount of net fixed assets to total assets. This expands the definition to encompass all that the company has acquired by purchase or by contributions owner.

The modernity of the production equipment (Equipment and Facilities) by comparing the gross amount of fixed assets and depreciation applied: if for example, the net assets (net of depreciation) is close to zero, this means that the tool is almost immobilized amortized should he consider new investments? The financial standing of ...