Explain the terms price earnings ratio

Reference no: EM13205803

A great number of individual investors are now considering investing in products available through a stock exchange. There are over 2,000 companies listed on the Australian Securities Exchange.

This assignment has THREE 3 parts, all parts are compulsory. Your task is to answer the following questions:

PART 1

1. Explain the major purposes of a stock exchange.

2. Identify and explain three types of securities that can be traded by individual investors on the Australian Securities Exchange (ASX).

3. Explain how companies go about listing on the ASX.

4. Briefly explain three listing requirements that are imposed upon companies by the ASX.

5. What is the ASX profit test and asset test and why are these rules in place?

PART 2

Answer the following questions on one of the companies listed below. Your choice of company is determined by the following formula.

If your student ID number ends in a ‘1', ‘2' , ‘3' your company is Qantas Airways (Australia)

If your student ID number ends in 4' , ‘5' or a ‘6' your company is Westpac Banking Corporation (Australia)

If your student ID number ends in ‘7', ‘8', ‘9' or a ‘0' your company is Woolworths (Australia)

6. What does this company do and when did it first become listed.

7. What other companies would this firm directly compete with? Do you think your company is a market leader? Explain your answer

8. a) Outline the general trend in the company's share price over the last 6 months.

b) Outline the general trend in the S&P/ASX200 over the last 6 months.

c) Comment on the performance of this company relative to the S&P/ASX200 over the last 6 months

9. Using historical data on prices for the last 5 years from June 2007 to June 2012.

Calculate this company's expected return. Briefly explain what your result means.

10. Assess the risk that your return might not be what you expected.

PART 3

11. Explain the terms Price Earnings Ratio; Dividend Yield; Earnings Per Share.

12. Find the value of each of these indicators for your stock on 1 August 2012. What do they indicate about your stock?

13. Has this company made any announcements to the ASX in the last 6 months? If so was this announcement significant? (In your answer explain under what circumstances a company is required to make an announcement to the ASX).

14. Will this company pay a dividend in the next 12 months and if so how much?

15. Would you buy shares in this company. In your answer explain what information you have considered in making this decision and what extra information would have been of assistance.

Reference no: EM13205803

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