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Analysis of Share Price of a Leading Bank National Australia Bank Limited Assessment Answer

Assessment Type: Written Report – individual assessment

Purpose: This assessment is designed to reinforce the subject content and develop students’ skills and application of knowledge of the subject content to business situations. This assessment relates to learning outcomes a, b and c.

Topic: This assignment covers contemporary theoretical concepts with practical accounting task application based on the topics from the subject.

Task Details: Students are then required to select an ASX corporation, reference the share price for the last 2 years and link information that may have impacted on the corporation’s share price during this time. Students will review general purpose financial report material, company releases, media, and other sources. Students must prepare a comprehensive report directed to this research. The report: should include educational certificates, data extracted from the general purpose financial report and additional material relevant to the analysis you accessed.

Presentation: Report – 1500 word report. The word count excludes the cover sheet, contents page, references, appendices, and illustrations (e.g. diagrams, graphs and tables). Students need to stay within the assigned word limits, and indicate the word count on the cover page of the assignment.

The report should be typed double spaced, using Times New Roman font size of either 10 point or 12 point. Every page should be clearly numbered.

The assignment should include the following parts:

o A title / cover page, which indicates basic information such as Subject title, Subject code, Trimester

number, Assignment title, group members’ full names and KOI student numbers, word count and name

of the tutor;

o Executive Summary

o Table of Contents

o Main contents – Introduction, analysis using suitable headings and subheadings, Conclusions and

Recommendations, Appendices (if any); References (using Harvard – Anglia style); and/or o Attachments.

Marking Guide:

Research – extent and application 30%

Analysis 30% Recommendations/conclusions 30% Presentation 10%

This mark will be scaled to a mark out of 20 subject marks.

Answer

Share Price Analysis 


Executive summary

The National Australia Bank is one of the leading listed banks of Australia. The bank has been performing well since years, yet a slowdown in the profits in the recent financial year. The share price of the company has been a matter of discussion because of the severe fluctuations. The reasons of the fluctuations have analysed to be on the operational, financial and other ends. The company even when has shown a very low share price is yet expected by insiders and analysts to perform well in future. 

Introduction

Every company operating in a public ownership works for the motive to create wealth for its shareholders. This wealth is measured in terms of the value designated to the company. In short, the value of company is constituted by the share price of the stocks of the company. When the value of the company’s stock rises, the wealth of the shareholders increase. However, in the modern globalised business platforms the share price fluctuates very often. The fluctuations are on account of the several operating and financial conditions prevailing around the business at different periods. 

The current report has been prepared on the analysis of the share price of a leading bank listed on Australian Stock Exchange. The bank’s name is National Australia Bank Limited. The bank’s share prices for financial years 2017 and 2018, till current period have been analysed. 

Analysis of share price

Financial year 2017

For financial year 2017, the share price of the stocks of NAB has shown a significant rise. Starting from USD 8.647 in October 2016, the share price raised to USD 10.955 in September 2017 end. The months of March and April 2017 however, have shown a decline of 0.39% and 12.64% respectively. The share price was lowest of USD 9.394 for April 2017 end (Salim, Arjomandi, and Seufert, 2016).


Figure 1 Share price of NAB

Source: - (Self-created)

The company has announced dividend of USD 0.3713 in November 2016, which has added to the share price for the month end. Although the share price had been on the rising trend, yet the decline gathered is because of certain reasons. This could be very well linked to the retirement of Mr Daniel Gilbert and Ms Jillian Sega, the Non-executive directors in 2016 December. Also, the increasing market competition could be attributed as a good reason which has led to market fluctuations. The kind of disturbances being faced by European banks has also impacted the stock prices of company. These disturbances have been on account of the high percentage of loan to total assets.

The rise in the share prices have been because of satisfactory performance of the company’s operations. The performance has helped the company to boost the demand of its shares in the market.  The shared price of the company has increased in this season due to the increased profit earning and high amount of return on capital employed due to the financial efficiency in its business. The rising demand has ultimately helped in boosting the share price of the company. The positive growth in revenues and efficient margins has resulted in higher end stock prices. The company has invested well in the priority sectors, which have leaded in good results as well. However, collectively the stock performance has been favourable enough for entire year. The volatility expected for share price had been 20%, which however the company managed to bring into balance. The highest volatility observed was 12.64 % (Notes, and Series, 2019).

Financial year 2018

The company’s share price began at a high note at the starting of the year. It was recorded at USD 10.955 in October 2017, while it landed at USD 8.298 in September 2018. The financial year can be termed as a rollercoaster year in terms of the share price fluctuations witnessed. The stock price moved down, then up, then down, then up and again down. The shares were available for trade at lowest price at the end of financial year. One major reason offsetting the share prices have been the fall in the net profits of the organisation. This financial setback has crushed shareholder confidence and has led to degradation in the demand of the shares. The falling demand has caused a decline in the share price of the company’s shares (Salim, Arjomandi, and Seufert, 2016).

The operational conditions too have leashed the company’s share performance. Certain claims casted on company on account of Conduct Indemnity Deed with CYBG have resulted in several losses to the company. The adverse impact of this loss has been on company’s reputation as well. The raised competition in market had also led to the destruction in the company’s market share. 

The growth in the share price can be masked with the several growth indicators of NAB. The company despite of fall in net profits have continued to declare dividends for shareholders at regular intervals. The shareholders dependent upon regular income source of declared dividend are still stuck to hold company’s shares for that purpose. The groups operating environment at global level too has witnessed several positive indicators pushing the share price in a right track (Williams, 2016). The steady growth of US economy, easiness of China’s growth rate, etc. have supported the financial market. 

After financial year 2018

The period after the end of financial year 2018 has shown a lot improvement in the share price of the company’s stocks. The latest share price recorded had been USD 9.35 at the start of August 2019. The company’s share price has been on rise because of the recent trends of high purchase of company’s shares. The purchase has been high because of the optimistic performance of company in future period. The high purchase is a result of high demand of company’s shares in market. The high demand has led to a growth in the company’s share price.

However the growth is good, yet several fluctuations are present in the performance. It is expected that current price is low and is bound to rise. 

Recommendations

The company’s share price is expected to rise, but several positive operational steps at company’s end could prove helpful. The company must stick to declaring regular dividends to support investor trust and confidence. A strong step to merge with another bank could help the company in grasping a large market share as well as strong shareholder base (Luetjens, Mintrom, and t Hart, 2019). This would also reduce competition. The company could add an influential member to the Board. Adding a new member shall add to the goodwill of the company and would raise the share price (BartlettIII, 2015).

Conclusion

The company’s shares have been measured on a volatile scale. The shares have shown several ups and downs. The several changes in company’s board, operations and financial counterparts have led to this volatility. The company’s shares even with so much of fluctuations are still expected to show a good raise. 

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