Beruflich Dokumente
Kultur Dokumente
Investors in
the share market
Websites:
www.ato.gov.au
www.asx.com.au
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-4
Slides prepared by Peter Phillips
6.1 Share-market investment (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-5
Slides prepared by Peter Phillips
6.1 Share-market investment (cont.)
1. Systematic risk
▪ Factors that generally impact on share prices in the market;
e.g. economic growth, and changes in interest rates and
exchange rates
2. Unsystematic risk
▪ Factors that impact specifically on the share price of a
corporation; e.g. resignation of the CEO, technology failure,
board problems
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-6
Slides prepared by Peter Phillips
6.1 Share-market investment (cont.)
• Diversified investment portfolio
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-7
Slides prepared by Peter Phillips
6.1 Share-market investment (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-8
Slides prepared by Peter Phillips
6.1 Share-market investment (cont.)
• Investors may take one of two approaches
– 1. Active investment approach
▪ Portfolio structure is based on share analysis, new information
and risk-return preferences
– 2. Passive investment approach
▪ Portfolio structure is based on the replication of a specific
share-market index, e.g. industrial or telecommunications
sector index
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-9
Slides prepared by Peter Phillips
6.1 Share-market investment (cont.)
• Investors need to consider asset allocation within a
share portfolio
▪ Risk versus return
▪ Investment time horizon
▪ Income versus capital growth
▪ Domestic and international shares
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-10
Slides prepared by Peter Phillips
6.1 Share-market investment (cont.)
• The recent global financial crisis has caused much
concern, particularly among those in or approaching
retirement
• A large amount of retirement savings is invested in the
share market
• For those nearing retirement the investment horizon is
shorter, particularly if money will be withdrawn from the
share market upon retirement
• When market prices fall sharply, these individuals are
adversely affected. Importantly, they have the least
time to recover their losses (before retirement)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-15
Slides prepared by Peter Phillips
6.3 Taxation (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-16
Slides prepared by Peter Phillips
6.3 Taxation (cont.)
• Capital gains tax on shares purchased
– 19/9/1985–21/9/1999
▪ Taxpayer’s marginal tax rate applied if held less than 12
months
▪ Taxpayer’s marginal tax rate applied to indexed capital gain if
held over 12 months
– Since 21/9/1999
▪ 50% discounted gain if held at least 12 months; or
▪ indexed capital gain or 50% discounted gain if purchased
19/9/1985–21/9/1999
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-20
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Capital structure (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-21
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Liquidity
• The ability of a company to meet its short-term financial
obligations
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-22
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Liquidity (cont.)
• Measured by liquid ratio
• The higher the current and liquid ratios, the better the
liquidity position of a firm
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-23
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Debt servicing
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-24
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Debt servicing (cont.)
Interest cover earnings before finance lease charges, interest and tax
finance lease charges and interest
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-25
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Profitability
EBIT
total funds employed (shareholders' funds and borrowings )
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-26
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Profitability (cont.)
EBIT
long - term funds (i.e. total funds less short - term debt)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-27
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Profitability (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-28
Slides prepared by Peter Phillips
6.4 Financial performance indicators (cont.)
Share price
• Represents investors’ view of the present value of
future net cash flows of a firm
2. Non-systematic risk
▪ Arises from firm-specific factors, e.g. management
competence, labour productivity, financial and operational risks
▪ Can be eliminated in a well-diversified portfolio
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-32
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
• Estimating the price of a share
D t
t1
P
1rs t
0
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-33
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
• Estimating the price of a share (cont.)
D
P
0
0
rs
P D
0 0
r g s
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-34
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
• Cum-dividend and ex-dividend
– During the period between the two dates, the shares have
the future dividend entitlement attached, i.e. cum-dividend
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-35
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
• Cum-dividend and ex-dividend (cont.)
▪ Example:
Share price cum-dividend $1.00
Dividend paid 0.07
Theoretical ex-dividend price 0.93
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-36
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
• Bonus share issues
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-37
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
• Bonus share issues (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-38
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
• Share splits
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-39
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
• Pro-rata rights issue
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-40
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-41
Slides prepared by Peter Phillips
6.5 Pricing of shares (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-44
Slides prepared by Peter Phillips
6.6 Stock-market indices and published share
information (cont.)
• Market indicator indices
– Price-weighted, e.g. Dow Jones
▪ Weighting of a company proportional to its share price
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-45
Slides prepared by Peter Phillips
6.6 Stock-market indices and published share
information (cont.)
(cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd
PPTs to accompany Financial Institutions, Instruments and Markets 7e by Viney and Phillips 6-48
Slides prepared by Peter Phillips
6.7 Summary (cont.)