Principles of Financial Markets

Table Of Content

INTRODUCTION1

DISCUSSION1

A.Top Down Analysis- Overview of the Australian Economy1

Investment Climate in Australia2

Exports trend in Australia4

B.Bottom up Analysis - Apple Inc and Microsoft Corporation4

Over view of the Apple Inc4

Over view of the Microsoft Corporation5

Reason to choose these companies5

Financial Statements Comparison6

Ratios Analysis6

1.Profitability Ratios6

2.Liquidity Ratios7

3.Debt Management8

4.Asset management9

5.Investor Ratios10

6.Balance Sheet and Income Statement Apple Inc &Microsoft11

7.Dividend yield Of Apple Inc12

8.The Price-Earnings Ratio13

CONCLUSION13

REFERENCES15

APPENDIX17

Principles of Financial Markets

Introduction

This paper intends to make a fundamental analysis. The first section of the paper is focused on 'Top down' fundamental analysis. For this purpose it explores the Australian economy and its current market indicators. Further, in this section the stock market position is also analyzed to see if there are favourable conditions for investment. However, the next section of the paper is focused on 'Bottom up' fundamental analysis. For this purpose, Apple Inc Company is chosen to analyze its financial position with the help of various financial ratios and those are compared with the industry and its historical performance in past.

Discussion

Top Down Analysis- Overview of the Australian Economy

The Economy of Australia has a prosperous Western-style growth, ranking sixth in the world in terms of GDP per capita as compared to the countries like the United States, France, United Kingdom and Germany. The ratings were issued by the International Monetary Fund in 2012, according to which it shows that there is relatively low cost of living.

The economy holds competitive advantage in manufacturing principal commodities, which is a true reflection of the prosperity of Australian economy. 20.3 million People occupy a territory about the size of the United States. Service industries have expanded in recent decades at the expense of the manufacturing sector, which currently accounts for approximately 12 percent of GDP (Australian market data, 2012).

Australia's ultimate goal is to become a competitive producer and exporter not only of traditional agricultural and mining products, but also a diversified mix of manufactured goods, services and technologies with high added value. While progress has been the result of this reform agenda, much remains has to be done, particularly in the domestic arena. While a short-term projection points to continued economic growth, the prospect of Australia in a long term depends primarily on pursuing fundamental economic reforms. There is general consensus among the major political parties, businesses, and workforce on the necessary features of this reform but highlights differences of views on the methods, steps and the degree of change required (Equity & Diversity Annual Report, 2012).

The influence of the People's Republic of China in the growth of the economy has also fuelled the growth of Australian exports of mineral and energy resources. There is a recent LNG contract in the state of Western Australia. China's industrialization has led to an export boom for corporate resources, contributing, thus, to increase the income of the Australian Federal Government through taxes from these companies. China has become now one of the major exporting countries for Australia, which has been extremely beneficial for the economy of Australia (Reserve Bank of Australia, ...