Investment theory Essay Example for Free

Investment theory Essay The efficient market hypothesis (EMH) is an investment theory that states it is impossible to beat the market because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to this theory, the stock always trade at their fair value on stock exchanges. This makes it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. EMH provides that it should be impossible to outperform the overall market through expert stock selection or market timing. The only way an investor can possibly obtain higher returns is through purchasing riskier investments (Answer. com, 2006). Using the EMH theory, this research study will examine the efficiency of the United Kingdom (UK) stock market indices by providing an internal performance comparison between FTSE 250 and FTSE AIM. A total of two hundred (200) companies will be used for the analysis, with one hundred (100) companies from each index, on the basis of trading value from all sectors, using Datastream platform. Two inputs (total sales and EBIT), and two outputs (total capital employed and total assets) will be used to analyse the data from each company. Literature Review Although EMH is deemed the cornerstone of modern financial theory, it has also been highly controversial and much disputed. Critics say it is pointless to search for undervalued stocks or to try to predict trends in the market through either fundamental or technical analysis. A review of related literature however will show that a large body of evidence show support of EMH. While academics point to a large body of evidence in support of EMH, an equal amount of dissension also exists. For example, investors such as Warren Buffett have consistently beaten the market over long periods of time, which by definition is an impossibility according to the EMH. Detractors of the EMH also point to events such as the 1987 stock market crash (when the DJIA fell by over 20% in a single day) as evidence that stock prices can seriously deviate from their fair values. (Answers. com) In finance, the efficient market hypothesis (EMH) asserts that financial markets are efficient, or that prices on traded assets, e. g. stocks, bonds, or property, already reflect all known information and therefore are unbiased in the sense that they reflect the collective beliefs of all investors about future prospects. The efficient market hypothesis implies that it is not possible to consistently outperform the market — appropriately adjusted for risk — by using any information that the market already knows, except through luck or obtaining and trading on inside information. Information or news in the EMH is defined as anything that may affect stock prices that is unknowable in the present and thus appears randomly in the future. This random information will be the cause of future stock price changes.

Pink Floyd Biography :: essays research papers

Pink Floyd may have been a revolutionary band from the late sixties to today, but you truly can not appreciate the band until you know of its members. First off is, David Gilmour. He was born on March sixth, nineteen forty-six. He has eight kids, four with a past wife, Ginger, and three with his current wife, Charlie (Charlie had a kid from a previous marriage). David was raised by easy going parents, and was given his own guitar at thirteen. As a young teenager he was brought to the U.S. because of his father's job. He started playing at military bases in a band named Jokers Wild, and working odd jobs including modeling. In his spare time he enjoys flying and collecting vintage aircrafts. Next is Nicholas Mason the band's drummer. Born on January twenty-seventh, nineteen forty-four, Nick has three kids with his wife, Annette. He was born to a rich family and from childhood accompanied his father to car shows. Nick attended the Frensham Heights boarding school at which he is still remembered as a mischief maker. Today he races and collects cars such as Ferraris, Bugattis, and Macerates. Another important player in this awesome band was Richard Wright. Born on July twenty-eighth, nineteen forty-five, and has three kids: Gala, Jamie, and Benjamin. Met Nick and Roger at he Regent Street Poly. He enjoys taking his sixty-five foot yacht out when he is presented the opportunity. The second most important person in the band was George Waters or Roger As he preferred. Born on September sixth, nineteen forty-three. Roger has two kids and has recently divorced for the third time. Roger's farther was killed in the war and he never had a chance to know him. He tried the navy and quit soon after joining. The single most important person that truly got the band persona started was Roger "Syd" Barrett. Born on January sixth, nineteen forty-six. Barrett had an above average childhood with supportive parents with a fair amount of money. He was a good student with a lot of friends. His parents encouraged his music with providing the supplies necessary for it. Syd was the founder of Pink Floyd and gave the band its own personality. Since the sixties the band had pushed their music to the limit, mixing pop, classical, and rock they had a ground breaking formula to success. Most fans know of only the hits that the band had in seventies, and of none of the controversy and pit falls the band suffered throughout their career.

Being Mindful Essay

Being Mindful â€Å"Mindfulness described as being in the present moment† (Wood, 2010). The present moment holds a potentially infinite number of things going on both inside the mind and outside the mind. A person is not completely lost in an activity, nor are they completely lost in thought, whether a person is eating a meal, or playing a musical instrument, they are aware of what they are doing. If a person gets all of the worries and regrets out of their mind, it is easier to focus on the things that are happening in the present. A person simply observes whatever is happening, without taking sides or forming attachments to any one single mindset. They are mindful when the mind is open to new thoughts, new ideas, new possibilities, and new ways of thinking. Being mindful contributes to greater effectiveness in the here and now, not the there and then. A person’s mind is not automatically blinded by judgment, evaluation or any one rigid way of thinking, it is the person themselves that create this mind set. In a person’s day-to-day experiences, the conscious mind is always struggling to keep up with the endless flow of changes in the external world. To make the job easier, the mind creates a series of generalizations and assumptions about the world, so we as people believe that we do not have to do as much thinking. Whatever is going on, whether we are working, running, or enjoying a meal, we should always be aware of what is going on around us. Someone should not be overburdened with worries or even dreams of the future, and should not be full of regret or longing for any part of the past, just enjoy experiencing the present moment to its fullest. These three things are important while being mindfulness: Observing with all our senses, one-mindfully (think of one thing at a time), notice when the mind goes somewhere other than the present, and when it does that’s when one needs to then pull it back. University of Rochester researchers report that individuals who are mindful are in tune with their emotions and do act in ways that are compatible with their values and interests. Mindfulness, which is an enhancement of attention too, and awareness of the present, can be linked to better moods, higher self-esteem, a greater life satisfaction, and optimism in all signs of positive psychological health (Rochester, 2010). â€Å"Mindfulness appears to heighten the joys one can experience in everyday events, as well as to be in better touch with what one really needs and feels, It helps people make better choices in a complexworld,† says Ryan, a professor of psychology and psychiatry. To be mindful a person has to put aside their worries about the future and regrets about the past. This can be really liberating since much of what upsets us has happened in other times than the present. I remember listening to my child, tell me about the week they ahead for them of school, but the whole time I was thinking about work that day and what I was going to have to accomplish tomorrow. As the week went on my child came to me and said,† Mommy do you remember I told you about our field trip that we have tomorrow, and you said we could go tonight and get my lunch for the fieldtrip? † Then I realized that she had told me all about it, on that day she was speaking to me; my mind that day had been filled with worries of what had happened at work and of what was, going to happen at work, not on the present moment, it made feel agitated that I had done this to my child. That I had not been very mindful to my child’s needs as I was more concerned with work and the days ahead of me, rather than what I had right there in front of me, that should have been the only thing on my mind at that present moment. In conclusion if more people were mindful to what is in the present moment, be it a parent that is listening to their child, or a student listening to their instructor, parents may have a better understanding of their children and students may have a chance to pass their next test. Being mindful can be a difficult change, but with practice, it is a change many people can make successfully. To have this success a person must remember these three elements: 1) observing with all the senses, 2) one-mindfully (think of one thing at a time) and 3) notice when your mind goes somewhere other than the present, then that is when one needs to pull it back. References Rochester (2010) RetreiviedOctober 2010 From http://www. rochester. edu/news Wood, J. T. (2010). Interpersonal Communication. Wadsworth Cengage Publishing.

Financial Performance Engineering Sector Essay Example Pdf - Free Essay Example

Sample details Pages: 8 Words: 2449 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? In this report the two companies chosen for comparing the financial performance for the year 2009 are Fluor Corporation and Foster Wheeler AG (FW). Here we examine and assess the financial positions and performances of these two companies by reviewing their annual reports and by considering subsequent events and comments of analysts and press reports. As for many businesses, not least in the Engineering and Construction (EC) sector, the global economic downturn has been a huge challenge for Fluor and Foster Wheeler AG over the last two years. Don’t waste time! Our writers will create an original "Financial Performance Engineering Sector Essay Example Pdf" essay for you Create order Fluor: Fluor Corporation is one of the worlds largest EC companies. Fluor is a FORTUNE 200 Company with 36,000 employees operating globally. Fluor has a very diversified portfolio. The breakup of each sector based on revenue generated in 2009 is shown below in the pie chart. Foster Wheeler: Foster Wheeler AG is a global EC contractor and power equipment supplier. The company employs approximately 13,000 professionals in more than 25 countries. Foster Wheeler is involved primarily in two major sectors which are oil gas and power. As per ENR construction News, the Top 100 Global Design Build firms, Fluor topped the list and Foster Wheeler was placed on 5th rank. In this financial report consideration has been given to the principal relevant ratios and trends analyses for these two companies in terms of profitability, efficiency, cash flow and financing and what these ratios and trends mean with a summary of critical view of Fluor and Foster Wheelers future prospects in a t ough and competitive EC market. Profitability Businesses generally exist with the primary purpose of creating wealth for their owners. Profitability ratios provide an insight to the degree of success in achieving this purpose. Gross Profit The gross profit margin relates to the gross profit of the businesses to the sales revenue generated for the same period. The gross profit margins for Fluor and Foster Wheeler are shown in Graph 1. Graph 1 Fluor: The gross profit of the Fluor shows marginal upward increase over the last 4-years period. In the second half of 2008, when the world economy slid in recession, crude oil prices slipped from an all time high of $147 per barrel to a very low of $33 per barrel, most of the oil gas investors shelved their running projects which hit Fluors profitability. Despite this extraordinary global crises situation Fluor was able to maintain its gross profit because of its diversified market. Foster Wheeler: The gross profit of Foster Wheeler shows strong growth in year 2005 and 2006 and then slight downward trend. The company has returned to profit in year 2006. After returning to profit FW has shown strong results and year 2007 saw profitability peak before the world economy slid in recession and oil and gas sector was badly affected. Due to its limited portfolio in EC, the companys gross profit experienced severe setback during recession. Net Profit Net profit is often regarded as the most appropriate measure of operational performance when used as a basis of comparison, because differences arising from the way in which the businesses are financed will not influence the measure. Graph 2 Fluor: The net profit (Graph 2) of Fluor shows a similar trend in line with gross profit over the same period. EC sector has got very intense cost cutting measure and works on very low profit margin but on a very large scale of projects (a single project may cost billions of dollars). Decreasing crude oil prices and lack of investors let EC sector see the most of their projects shelved/cancelled which affected Fluors net profit. Foster Wheeler: The net profit (Graph 2) of Foster Wheeler shows a strong growth pattern in year 2005 and 2006, then steady growth rate with marginal decline in 2009. The company has suffered a major setback on its net profit because some of its ongoing projects has shelved/cancelled in later half of 2008. The company also has very high level of expenses relative to its revenue generated. Return on Capital Employed (ROCE) The ROCE is a fundamental measure of business performance. The ROCE for Fluor and Foster Wheeler are shown in Graph 3. Fluor: With reference to ROCE, Fluor performance shows an upward and strong result with slight decline in 2009. In EC sector the capital employed is much lesser in comparison with other sectors of businesses. Due to the above reason Fluor were able to put in a very strong performance in terms of ROCE. Foster Wheeler: With reference to ROCE, Foster Wheeler performance shows a very strong but a zigzag return trend, which goes against their market image. Analyst/investors look for a steady or upward performance. The ROCE has dropped in 2007 and again in 2009 in a similar profile to profit margins decline but higher than Fluors performance. Graph 3 Efficiency Asset Turnover The asset turnover is a companys ability to generate revenue from its asset base. The asset turnover for Fluor and Foster Wheeler are shown in Graph 4. Fluor: In the past years Fluor has had consistently an asset turnover of 2.5 or above. In year 2009 they had an asset turnover of 3.1 taking into account total revenues of $21,990.0m and total assets of $7,179.0m. The asset turnover graph shows an excellent performance over five years of time. The performance during the last two years should be taken as being very positive given the economic climate which demonstrates Fluors ability to generate revenues from its assets in tough times. Graph 4 Foster Wheeler: In the past years Foster Wheeler had asset turnover of 2.0 or less except year 2008. In year 2009 they had an asset turnover of 1.6 taking into account total revenues of $5,056.0m and total assets of $3,187.0m. The assets turnover decreased in 2009 but above its average and significantly higher than the worst time a few years back. Liquidity There are a number of measures that can be used to measure the liquidity of the organisations as follows. Acid Test Ratio (Current Ratio) The current ratio compares the liquid assets (that is, cash and those assets held which will soon be turned into cash) of the business with current liabilities. The higher the ratio, the more liquid the business is considered to be. Fluor: In the past years Fluor has had very consistent and upward current ratios. As in the case of EC companies, comparatively less inventory involved; the current ratio becomes an acid test ratio. The minimum level of acid test ratio is often stated as 1.0. Fluor has been traditionally maintaining its acid test ratio much higher. In year 2009, they achieved an acid test ratio of 1.55 as shown in Graph 5. Foster Wheeler: In the past years (2004 and 2005) Foster Wheeler has acid test ratio less than 0.85. This was the time when the company was in trouble and on the brink of filing for bankruptcy. In year 2006, they started building their liquidity situation better and in year 2009, they have their highest acid test ratio of 1.51 as shown in Graph 5. Graph 5 Investment Ratio Return on Investment Graph 6, assumes the investment of $100 on December 31, 2004, in each of Fluor, Foster Wheeler, the SP 500 Index and DJ Heavy, and the reinvestment of dividends paid since that date. Dow Jones Heavy Construction Industry Group Index (DJ Heavy) consists of the following companies CBI, Jacobs Engg, KBR, McDermott International, and Shaw Group. The DJ Heavy Group consists of companies that were compiled for benchmarking the performance of compared shares in this analysis. Fluor: Fluors total return to shareholders over five years relative to Foster Wheeler is low but higher than the SP 500 and DJ Heavy. Fluor has been paying cash dividends per common share of $0.50 every year. Fluor Corporations performance is steady, consistent and upward over the last five years. Foster Wheeler: FW have not declared or paid a cash dividend since July 2001 and they do not pay any cash dividends due to their current credit agreement which contains limitations on their ability to pay cash dividen ds. Foster Wheeler has a very volatile performance but strongly above Fluor, SP 500 and DJ Heavy. Graph 6 Earnings per Share Ratio The earnings per share (EPS) relates the earnings generated by the business, and available to shareholders, during a period to the number of shares in issue. Many investment analysts regard the EPS ratio as a fundamental measure of share performance. Graph 7 Fluor: Fluor has very consistent and upward performance. Their EPS is always higher and shows an upward trend over last several years. Foster Wheeler: Foster Wheeler, after returning to profit, shown very strong potential with their performance. Cash Flow Fluor: Cash and cash equivalents were $1.7 billion as of year 2009, essentially higher than the $1.8 billion as of year 2008. Cash and cash equivalents in 2008 increased $0.7 billion compared to 2007. Cash and cash equivalents combined with current and noncurrent marketable securities were $2.6 billion and $2.1 billion as of year 2009 and 2008, respectively. Fluor has maintained its cash flow to increase its stability in the current economic climate. Fluor has been successfully reducing its debt every year. Currently (year 2009) they are having a total debt of 3.7% of total capitalization while in the year 2008 it was 5.3%. Graph 8 Foster Wheeler: Cash and cash equivalents were $997.0 million as of year 2009, higher than the $773.0 million as of year 2008. Foster Wheeler reached its highest cash flow in the year 2007 to the $1.0 billion mark. The company has strived to increase cash flow to increase its stability in the current economic climate. As a result of an improved cash flow management, total liabilities were down to 2.3 billion (year 2009) from $2.6 billion (year 2008). Financing Fluor: Fluor employs its retained earnings as the main source of internal finance. Cash utilized in financing activities during 2009 and 2008 of $317 million and $253 million, respectively. Cash utilized in financing activities during 2009 also included company stock repurchases. Fluor is considered to be highly geared as it relies on borrowing in the equity structure. One benefit of this type of financing is that it can be used to increase the return on shareholders equity as the interest payable can be claimed as a tax relief. Fluor gearing ratio shows declined pattern in recent years, which need to be addressed in near future. Graph 9 Foster Wheeler: In line with Fluor, Foster Wheeler also employs its retained earnings as the main source of internal finance. Cash utilized in financing activities during 2009 and 2008 of $1.4 million and $(46.0) million, respectively. Cash utilized in financing activities during 2009 also included company stock repurchases. Foster Wheeler was considered as being less geared previously because of its bad financial position. Foster Wheeler started improving on this aspect and now it can be considered as relatively better geared. Future Outlook Cash flow in the Engineering and Construction (EC) sector is improving well, and capital markets are reopening for larger projects. Both of these factors might lead Fluor and FW to better-than-expected results. As the economy recovers, it will be a driver in getting Fluors and Foster Wheelers clients to start projects sooner rather than later. Fluors backlog is expected to be growing again in year 2010 while Foster Wheelers expected to decline. Fluors prospect in mining continues to show very strong growth rate. Fluor reported first-quarter net income (2010) fell by a third from a year earlier, due to a decline in oil and gas revenue. Revenue fell 15% to $4.92 billion. As per forecast made by analysts, Fluor will be able to maintain its earnings $2.88 per share for 2010 and it will rise in 2011 to a range of $3.38 to $3.41 per share. Fluors end-market diversification has enabled them to deliver good profitability despite lower new award levels in recent quarters and the tr ailing impact of a significant reduction in spending by oil and gas clients. Foster Wheeler reported its first-quarter net profit (2010) reduced to $72.1 million or 56 cents a share, from $72.9 million, or 57 cents a share, a year ago (Rauters). Analysts expectation had been EPS of 54 cents, according to data compiled by FactSet. As analysts forecast, Foster Wheeler will be unable to maintain its earnings $2.77 per share for 2010, but it will rise in 2011 to a range of $3.15 to $3.31 per share. FW sales declined to $945.6 million, from $1.26 billion a year ago. Net income in the first quarter of 2010 was below the average quarter of 2009, mainly due to lower revenues, reflecting the weaker market conditions that began in the middle of 2008. Conclusions A recent Financial Times article focused on Foster Wheeler and compared them to Fluor it was pretty compelling. The comparative study shows how these two companies have reacted to recent times, with FWAG at the top showing the most upside over the past year, but also much higher volatility, while Fluor has been steadier with strong performance. Fluor is more highly valued than FWAG (forward PE of 23 versus 16), and it also has a broader business footprint. If anyone has to go with a broad bet on EC, Fluor would be the first place to look. On the other hand, Foster Wheeler has the relative simplicity of the business-they really have significant expertise in two major areas: power and oil and gas. They do work in other areas, too, but they are not spread quite as widely as Fluor. Foster Wheeler also has the siren song of a turnaround. The company has turned profitable now, after very nearly entering bankruptcy a few years ago. They made all the mistakes that EC firms tend t o make, especially in underbidding or taking on unproductive business when business wasnt so hot, but the level of suffering and their very near brush with bankruptcy gives some confidence that theyre focused on only making profitable bids going forward. And if big capital projects in refineries and in power plants pick up around the world, no other company is so specifically levered to these two businesses. The demand for traditional power plants is growing exponentially higher in the developing world. In a nut shell, it can be concluded from this comparative analysis that both of these companies are having very distinctive characteristics though they are working in the same sectors. Fluor appears to be more geared, better placed and has a very consistent and strong performance history. While in the case of Foster Wheeler, after a bad phase, the company has recovered and is showing very strong results. It has great potential in future with its capability of making things turn around and profitable. Appendix A: Reference List Fluor Corporation Annual Report and Financial Statements 2008 2009 Foster Wheeler AG Annual Report and Financial Statements 2008 2009 McLaney, E. Atrill, P. (2008) Accounting: An Introduction, 4th edition, FT-Prentice Hall Zacks Analyst Blog Highlights: https://www.zacks.com www.enr.construction.com www.rauters.com / finance www.businessweek.com / companies www.ft.comHYPERLINK https://www.rauters.com/ / companies www.google.com /finance Appendix B: Annual Report (2009) Data Fluor Corporation: Foster Wheeler AG: