...Financial Analysis: Billabong International Limited - Australia A paper submitted to Webber International University In partial fulfillment for the Master’s in Business Administration International Business By: Patrick L. Date: July 11, 2012 Course: MBA 6811 Semester: 2012 Instructor: Eberle Table of Contents Introduction 3 Country Factors & Monitoring Central Bank Intervention 4 Foreign Exchange Market & Movements in Currency 5 Currency Futures & Options 7 Arbitrage Opportunities & IFE 8 Monitoring Exchange Rate Trends & Risk 9 Direct Foreign Investment 11 Capital Budgeting 12 Corporate Governance & Country Risk Analysis 14 Capital Structure 15 Long-Term International Financing 17 Financing International Trade 19 Short-Term International Financing & Managing Cash Internationally 20 Current Events 21 Conclusion & SWOT Analysis 22 References 24 Introduction Billabong International Limited (BBL) is an Australia based listed company headquartered at Burleigh Heads in Queensland, Australia. The main business activities of the company are related to marketing, distribution, wholesale and retail of wetsuits, clothing, eye wears, hardboards for board games and accessories concerned with the season of snow fall, surfing and skating. Billabong’s products are being sold through...
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...cyclical nature of each individual indicator with economic growth and, thus, help us in choosing a set of economic indicators for forecasting the economic performance. To conclude, we state that by doing an economic indicator analysis through leading, coincident and lagging indexes, we can understand how well the economy performance as a whole. It also tells us the relationship between economy performance and the policy-making of a country. Introduction The measurement and analysis of business cycles has been one of the important research topics in economics and underlying theories of these economics arguments have changed as times goes by. In this empirical report, attention will be focus into the central questions on the causes of fluctuation in the economic activity by constructing a business cycle analysis and composite coincident index, a combination of several time series that one would expect to contain information about the current stats of the economy. However, the emphasis in a number of recent theoretical and empirical studies of business cycles has been in terms of growth cycles only. In general, there we pay little attention to the turning points since we are only interested in the relative volatility and co-movement among variables as well as the standard deviation of these economics...
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...“Critically evaluate how international and geo-political risk to business might impact upon a person’s overall lifestyle”. Introduction My lifestyle keeps me busy but I enjoy the ability to catch up with friends and relax at a café or the beach. I am able to do the things I enjoy through working two jobs, on a regular roster. I enjoy cultural activities with friends in Sydney and regularly getting to the beach for a swim. Australia is a beautiful country which allows me to enjoy the sun and beach on a regular basis. A combination of flexibility and structure allows me to financially support myself while studying full-time; work is enjoyable and adds to my social and physical well-being. The flexibility in university and work allows me to catch up with friends regularly, while maintaining my financial independence. The political environment enhances my wellbeing by provide an avenue to defer my university fees until I graduate and get a job. Risk is considered the probability of a specific loss of worth, against the prospect of gaining value through the intentional interaction with uncertainty (Slovic, 2000). Risk is associated with a given action and/or inaction, of a foreseen/unforeseen nature that can result in a loss or gain in regards to financial wealth or physical health. Slovic (2000) expresses that all human interactions carry some risk, but the degree of risk depends on the situation and the perception of its severity. ...
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...Bank The Reserve Bank Board sets interest rates so as to achieve the objectives set out in the Reserve Bank Act 1959 * the stability of the currency of Australia; * the maintenance of full employment in Australia; and * The economic prosperity and welfare of the people of Australia. Since 1993, these objectives have found practical expression in a target for consumer price inflation, of 2–3 per cent per annum. Monetary policy aims to achieve this over the medium term so as to encourage strong and sustainable growth in the economy. Controlling inflation preserves the value of money. In the long run, this is the principal way in which monetary policy can help to form a sound basis for long-term growth in the economy. The principal medium-term objective of monetary policy is to control inflation, so an inflation target is thus the centrepiece of the monetary policy framework. The Governor and the Treasurer have agreed that the appropriate target for monetary policy is to achieve an inflation rate of 2–3 per cent, on average, over the cycle.1 This is a rate of inflation sufficiently low that it does not materially distort economic decisions in the community. Seeking to achieve this rate, on average, provides discipline for monetary policy decision-making, and serves as an anchor for private sector inflation expectations. The inflation target is defined as a medium-term average rather than as a rate (or band of rates) that must be held at all times. This formulation...
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...to shed light on the importance of country-specific shocks for small open economies using a simple real business cycle model. While it has been previously found that country-specific shocks are more significant source of business cycle fluctuations than worldwide shocks for Australia before the 1990s, this article suggests that the country-specific shocks may have become an important driver of output growth only in the early 1990s for Australia. Keywords: worldwide shocks; country-specific shocks; international business cycle; half-life JEL Classification: E32; C32; F43 I. Introduction There has been a growing literature that seeks to extend standard closed economy Real Business Cycle (RBC) models to the open economy with the objective of explaining key features of international business cycles (Mendoza, 1991; Backus and Kehoe, 1992; Backus et al., 1992, 1995; Baxter and Crucini, 1993, 1995; Ravn, 1997). These authors have achieved some success in accounting for a number of anomalies that closed economy models fail to elucidate. Subsequent studies in this literature have emerged and brought interesting findings on international business cycle. One such discovery was on a variety of factors that affect the dynamics of business cycle fluctuations. For instance, multiple previous studies have attempted to address the issue of relative importance of worldwide shocks versus countryspecific shocks (Gregory et al., 1997; Canova and Marrinan, 1998; Hoffmaister et al., 1998; Kwark...
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...18/04/2012 Team of Financial Risk Management Content Executive summary 2 Company background 2 Global Financial Crisis influence 2 Risk Exposures 3 Foreign Exchange Exposure 4 Transaction Exposures 4 Translation Exposures: 5 Interest Risk Exposure 5 Borrowing exposure 5 Investment exposure 6 Gross Profit exposure 6 Recommendations for Two Risk Exposures 6 Foreign exchange risk 7 Interest rate risk 7 Appendices 8 Reference list 11 Executive summary Company background Global Financial Crisis influence The impact from the global financial crisis(GFC) on us is complex. Compared to our competitors, the situation showed that little was the overall operation of our company negatively affected. It was both the positive and negative effects of GFC that contribute to this. From the downside, we do experienced significant loss in several areas. Our share price has going down from $22.4 to $16 per share during the financial year 2008-2009. Our equity decreased 28.5% on its value, and apparently, stroked the worst record in years. In addition to the impaired equity value, GFC also challenged us with a lower investment yield, a decreased risk margin, as well as increasing claims of large individual risk. First, due to the fall in equity market, lower interest rates and the loss on our property (account 29.5% of our portfolio), we keep a low yield from our investment. Only 2.9% was the investment yield in 2009, which dropped from...
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...Exchange rates play a central role in the relationship between individuals, economies and the global economy. All of the trade and financial relationships between countries are mediated through the exchange of currencies. Therefore any movements in the exchange rate affect international competitiveness, trade flows, investment decisions, inflation and may other factors. Exchange rates are the price of one currency in terms of another economy’s currency, which facilitate economic transactions between individuals firms and governments in different countries. The FOREX market refers to the market in which currencies are traded, where the forces of supply and demand determine the price of one country’s currency in terms of another. In December 1983, Australia switched from a managed flexible peg to a floating exchange rate system. This is regarded as one of the most significant structural changes that Australia has implemented, because it opened up the Australian economy to global financial flows. Under a floating exchange rate system the exchange rate is determined by the free play of market forces and not by government intervention, unlike the previous system of flexible peg where the RBA would ‘peg’ the value of the $A at 9am each day and that price would operate throughout the day. One way to measure the movements in the exchange rates is the Trade weighted Index (TWI) which measures the value of the $A against a basket of foreign currencies of major trading partners...
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...The Impact of Globalisation on the Australian Economy By Anthony Stokes Lecturer in Economics, Australian Catholic University Globalisation is not new. Australia has been involved in trade, investment, financial flows, technology transfers and the migration of labour since its foundation as a colony. What has changed is the size, direction and influence of these transfers, especially since 1980. There are a number of factors that have aided this transformation. They include: • The expansion of new markets – foreign exchange and capital markets are linked globally. They operate 24 hours a day with dealings any where in the world possible in real time. Financial deregulation and the floating of the Australian dollar since 1983 intensified the impact of globalisation on the Australian economy. • New technology and the tools of globalisation – the internet, email, mobile phones, media and communication networks have all sped up the process of globalisation. They have increased the spread and speed of knowledge transfer and communication. Australian consumers can buy products from any nation in the world, transfer funds between accounts or purchase shares in any major market. Australian businesses can market their products at a fraction of the cost and be exposed to a global market place of competition. This potentially is the closest we will ever come to the perfect market. • New institutional players – The World Trade Organisation (WTO) has growing authority...
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...FINANCIAL RISKS ANALYSIS 16 3.1 Liquidity Risk 16 3.2 Capital risk 19 3.3 Strategic risk 22 3.4 Credit risk 23 3.5 Foreign exchange risk 25 3.6 Market risk 27 APPENDICES 29 REFERENCES 36 EXECUTIVE SUMMARY The main purpose of this report is to investigate Bendigo Bank’s business and financial risks for the sake of suggesting the most appropriate financially justified risk management strategy. The main content of the report is divided into four major parts including (1) Company analysis, (2) Industry and peer analysis, (3) Risk management analysis and (4) recommendation. The first section will critically provide a brief overview of the company background and detailed information about its core products and services consisting of personal banking, company banking and wealth management. Following section will discuss through macro-economic factors including the current state of the economy measured by relevant economic indicators. Then, the industry overview and the performance of major rivalries will be analysed and supported by conducting Porter’s five forces and Swot analysis. The critical section will deliver business and financial risks analysis via different categories of risks. The analysis will be complemented by the comparison between Bendigo &Adelaide Bank Ltd and other major competitors comprising of National Australia Banks Limited (NAB),...
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... | | | | | | | | | | | | | Simple comparison Currency in millions of Australian dollars the total revenue in 2013 is $15,902.00 compared with $15724.00 in 2012, followed by $14613.00 in 2011. Qantas seen a relatively flat in the revenue. Gross profit in 2013 is $4315.0 with $4181.0 in 2012, followed by $3939.0 in 2011. Net income in the consecutive three years are 5, -245, 250. There is an dramatic fluctuation appeared. Ratio analysis |Year/ratio |2011 |2012 |2013 |Industry average | |Current ratio |0.90 |0.77 |0.82 | | |Quick ratio |0.78...
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...arise * The major indicators of integration between economies include: * International trade in goods and services * International trade flows * International investment flows and transnational corporations * Technology, transport and communication * The movement of workers between countries Globalisation * Barriers have been put up to try and protect businesses * Benefits to removing barriers * Barriers have been removed but there are still some barriers that exist * Some say the EU is closing off itself to other countries * Benefits to globalisation: * Trading – we might not have products that are only overseas * Cheaper labour is overseas * Investment overseas and investment into Australia * Financial flows of banks * Technology * Businesses can become more productive * Disadvantages: * Other economies failure affects us. External shocks * Local businesses suffer as overseas businesses can be cheaper * Loss of cultural identity * China has been driving our economy for many years due to their demand for metals and minerals for their manufacturing sector Positives |...
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...financial, operational and hazard risks due to the nature of the operating environment. Financial risks create uncertainties about future cash flows due to changes in economic conditions as well as changes in revenues, operating expenditure and financing costs. Firms are urged to minimise these risks to have higher predictability on future cash flows in order to meet various obligations, for instance shareholders’ required rate of return and debt repayment. This report looks into Air New Zealand in particular to study two of the risks that are significant for an airline company, namely foreign currency risk and fuel price risk. Section 2 of this report gives an overview of the relationships between the operation of Air New Zealand with both the risks. Besides, discussions and suggestions on Air New Zealand risk management approaches are presented in Section 3. Finally, a brief summary and conclusion is included in the last section. 2.0 Risks Description 2.1 Fuel Price Risk The Nature of Fuel Price Risk Fuel price risk is the risk of fluctuations in fuel prices which could adversely affect the financial performance of Air New Zealand as jet fuel is a critical input factor for airlines. Fuel prices are affected by the supply and demand, oil price futures and the downside or upside movement in the US dollar against NZ dollar. In particular, the increase in jet fuel prices adds a significant amount to Air New Zealand fuel cost. This is further compounded by the fuel intensive...
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...the consumers’ spending by cutting taxes. The effect of fiscal policy: The variables will influence the economy in the aggregate demand so that the policy will achieve the objectives including the price stability, the economic growth and the employment. Keynesian economics indicates that the changes efficiently stimulate the aggregate demand at the economy boom’s beginning. (Blinder 2012) It is argued that Keynesian economics model can be used to establish the framework for strong economic growth. However, economists also debate the fiscal policy effectiveness. The arguments concentrate on crowding out effect whether the interest rate increase, which may offset the spending stimulation, is led by the government borrowing. (Fiscal policy of Cliff Notes 2013) Once the government faces the deficit, the public fund will be important, the interest rate will improve. 2. The major instruments of fiscal policy are the changes in the level and composition in tax and the government expenditure in different fields. The aggregate demand, the income distribution, the economic activity are influenced by the two major instruments. The debate how the government stimulates the economy is still the debated topic. The increase of government expenditure and the decrease...
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...Correction Model. If set of conditions have satisfied, the price of gold will rise over time at the general rate of inflation. Ranson (2005) tried to find out role of gold and oil as predictor of inflation. He found that gold price is more reliable barometer of the inflation than oil price because the effect on official inflation statistics, is reliably indicated by how far policy actions have allowed the price of gold to rise. Worthington and Pahlavani (2006) tested for the presence of a stable long-run relationship between the monthly price of gold and inflation in the United states from 1945 to 2006 and from 1973 to 2006. By applying unit root and modified cointegration test, they provided strong evidence of a cointegrating relationship between inflation and gold. This is in line with the view that gold can serve as an effective inflationary hedge. Levin and Wright (2006) tried to find out short-run and long-run determinants of the price of gold for the period January 1976 to August 2005. By using cointegration techniques they confirmed that the long-run price of gold moves only to the US price level, while short-run movements in the gold price were related to exchange rate, gold lease rate , gold’s beta, US inflation , US inflation volatility, credit risk and political uncertainty. Tully & Lucey (2007) investigated the relationship between gold prices and exchange rate of US Dollar. They used six different models of GARCH family in their study. Their analysis concludes...
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...Choose any futures exchange and elaborate on its characteristics and give a detailed description of its activities. Introduction Futures belong to the class of securities known as derivatives since its value is derived from the value of some other security. A futures contract is similar to a forward contract. Noting the shortcomings of the forward market, particularly the need and the difficulty in finding a counter party, the futures market came into existence. Futures contract is an agreement between two parties, that is a buyer and a seller, to buy or sell a particular currency or commodity at a future date, at a particular exchange rate that is fixed or agreed upon today. Characteristics Futures contract is much more liquid than forward contract as it is traded in an organized exchange, the futures market (just like the stock market). Futures contracts are standardized contracts and thus are bought and sold just like shares in the stock market. [pic] Futures contract is much more liquid than forward contract as it is traded in an organized exchange, the futures market (just like the stock market). Futures contracts are standardized contracts and thus are bought and sold just like shares in the stock market. It is also a legal contract just like the forward contract, but the obligation can be ‘removed’ before the expiry of the contract by making an opposite transaction. As for hedging with futures, if the risk is an appreciation of value one...
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