Strong Results on Broadband Success - Case Study Example

Financial Modeling With Decision Making Prepared by Submitted by Word count 1645 words Introduction The investment out of 2, 50,000 GBP on shares has been recorded on spreadsheet and this enables the user to calculate the returns or losses through the transactions. The amount deposited in high interest account is not displayed in spread sheet to differentiate the money invested on shares and that is deposited in the high interest account. The spread sheet is used to calculate the profit and loss through the investment done on purchasing shares. The features in the spread sheet are about the share purchase transactions, about brokerage charges, share buying prices, selling prices, the number of shares, the total value of shares of a particular company. The details of shares with above details are given in separate units for each company. In the spread sheet used in this case the shares purchased are regarding the companies Glaxosmithkline, B.SKY.B, Busuiness Post Group, Abbey PLC, Barclays PLC, Galantas Gold Corp, Halfords Group PLC, and Rolls-Royce Group PLC. The trading has been started on February 1st and the dealings up to march 15th are given. In case of Glaxosmithkline, the trader earned a profit of 900 GBP. The returns from B.Sky.B group shares resulted in negative growth. The selling price of shares is 700 GBP lesser than the buying price. This resulted in 700 GBP of loss in trading the shares of that company. This dented the returns from previous investment also and decreased the net profit to 200 GBP. Apart from this the trader bought and sold the shares of business post on February 1st and February 15th. This resulted in a profit of 800 GBP. With this transaction, the net profit reached the mark of 1000 GBP by February 15th. After that the trader bought the shares of Abbey Plc on February 15th and sold on March 1st. This resulted in a profit of 40 GBP and this increased the gross profit by March 1 to 1040 GBP. After that in a gap of one month between 15th February and 15th march, the Barclay's shares are purchased for Rs. 39805.50 and sold for 34348.50. GBP. This resulted in a loss of 5457 GBP. With this transaction there is loss of 4457 GBP on the whole investment. After this transaction on march 1st the trader invested 7950 on Galantas gold corp. and sold them for 8520 GBP. This resulted in a profit of 300 GBP. This decreased the loss from the transactions to 4157 GBP. The Halfords group shares are purchased on 1st March for 31454.5 GBP and were sold on 15th march for 31433 GBP. This resulted in a loss of 21 GBP and increased the loss to 4178 GBP. The Rolls Royce group shares are bought for 24562.5 GBP on 1st March were sold for 23387 GBP on 15th march. This resulted in a loss of 1175.5 GBP of loss and the total loss increased to 5353 GBP. Apart from the investment in high interest account the loss on trades mentioned in spread sheet incurred a loss of 5353 GBP. 2. Analysis of Trading decisions The first transaction used by the trader was with the shares of Glaxosmithkline numbering 10,000 and valued at 1,38,700 GBP. This resulted in a profit of 900 GBP. The decision of buying in February and selling in march is a good decision making when the single transaction is considered. This share can be retained and the sale of the shares in March is a short sighted decision as the share value has climbed up in the following months. As the company reported 6 percent increase of profit and closed the books with patent protection, there is every chance to earn more profits and increase the dividend distributed. This can result in increase of share price and the sale of the shares in March can be termed as a deal that has been done early than it should be done. The trader might have sold the shares of the company taking into consideration local market. As the company trades internationally and does business in US and other important countries of world, the share price of the company should be estimated accordingly. The drugs sold in US resulted in more profits for the company and this increased share price in the following quarter. The pound has been depreciated and this resulted in increase of exports and increase of turnover of the company. The profit per share of the company also increased from 19.6p a share to 20.8 p per share. The transaction resulted in less profit due to the short holding of this share. 1 The shares of B sky B are traded for a short period of 15 days and this resulted in a little loss. The investor could have waited for a little bit long time, as the company is banking on its broad band connections and pay TV. By the time the investor sold his shares, these two aspects did not show any result. The investor can sell his shares in it after watching the company's performance on those two aspects or he might have waited till the results regarding them have come. Instead of that he had sold them before the broad band and pay TV schemes have shown the results. This is specified because the company increased the dividend by 27 percent after the revenues from broadband and pay TV started to flow in. The revenue in flows are according to forecasts and this can be termed as a short sighted decision as the investor did not wait for a sufficient period and there is no analysis of the financial and operational activities of the company before selling the shares. This resulted in loss of the investment. This is because the company's shares hit a 3 year high in July 2007. In the following months after the transaction has been completed, the BskyB has new pricing strategy in place this drove strong operational momentum. These are declared in advance and analysis of the statements of the company at the time of selling of shares could have avoided the loss. 2 In case of shares of Business post group the investor recorded a profit of 800GBP. This is in the short period of 15 days. In fact the group's revenues are up by 17 percent to 32.6 million GBP. As the UK mail continued in growth, the revenues are up by 124 percent. There is every chance for the shares of the company to grow. The exceptional charges decreased up to 1.7 million GBP from 11.4 million GBP. These afore mentioned facts about business post group will make any investor to hold the shares waiting for a small or big rise. This did not happen in the present transaction and this resulted in only a small amount of profit that did not compensate the losses incurred in the share transactions of the investor as a whole. Had the shares of Glaxosmithkline and Business post group not sold by the investor within a short period of time, the value of them could have increased. This conclusion is due to the consideration of past and present performances. According to the estimates of the company and the experts, the present year has been considered as a demanding year for the business. The shares of the companies that are expected to give good results should not be sold and untimely selling of them may result in loosing the profits or incurring the losses as happened in the present transactions. Even in the case of B sky B, it seems that the merger and changes in policy of the company are not taken into consideration while selling the shares of the company. In case of Abbey Plc also the investor sold the shares in a period of just 15 days that resulted in a small profit of 40 GBP. As the company is the UK's sixth biggest bank and Europe's second largest mortgage lender, there is every chance for the company to incur profits and increase the share price. The company is taking cost cutting measures by closing the non profitable branches and this can result in the increase of profit margin in the current financial year. The good performance from the bank can increase its share price and the holding for one or two more months might have given a good result for the investment. This is because the bank is closing even overseas non performance branches like Derby and Warrington and new branches are being opened in countries like India, which are recording strong growth in their economy. This is capable of generating profits in the near future and the holding of the shares instead of selling them can give profits for the investor. This did not happen and the investor was not able to neutralize the losses incurred in the other investments. The spreadsheets can be used in a manner to display the loss or gain of the investments when the decisions are taken. This may avoid or can give a second thought while going for the transaction that reduces the profits or incurs the losses. Conclusion It can be concluded that the amount invested in high interest account has given good returns for the investor as there is a loss of 5353 GBP through the total transactions mentioned in the spread sheet. This is due to the selling of shares of the companies earlier than the time they can earn profits or can increase their prices. It happened due to the lack of analysis of the companies' performance and changes in policies. Though the amount invested in high interest account gave profits for the investor, the analysis of the companies' past performance, changes in policy and the changes in market forces or conditions could have given good profits. According to the analysis, every company has increased its share price after investor sold the shares he possessed. The selling deals of the shares that happened earlier than required time resulted in losses for the money invested in share transactions. References: 1. City wire, 2007, GlaxoSmithKline shares rise on FDA advisory panel's reprieve, City Wire, ,electronic, 1-07-07, http://www.citywire.co.uk/News/Share.aspxInstrumentID=153327 2. Kate Holton, 2007, UPDATE 2-BSkyB posts strong results on broadband success, Reuters.com, ,electronic, 1-07-07, http://www.reuters.com/article/marketsNews/idUKL2763307220070727rpc=44 Read More