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Before beginning work on this week’s discussion forum, please review the link Doing Discussion Questions Right, the expanded grading rubric for the forum, and any specific instructions for this week’s topic.

For this assignment, make sure you post your initial response to the Discussion Area by the due date assigned.

To support your work, use your course and text readings and also use outside sources. As in all assignments, cite your sources in your work and provide references for the citations in APA format.

Respond to all of the following questions using the lessons and vocabulary found in the readings:

Theories of management originated in the early 1900s. They have influenced how we view management today. Select one of the following bullet points for your initial response:

• Research one of the early theories of management and address the following items:
  • Describe the early theory of management.
  • Compare the differences between the theory you have chosen and at least one current approach/theory of management. In your comparison, include a minimum of two similarities and two differences.
• Explain the impact technology and innovation have on the role of a manager. Examine an early theory of management and a current theory of management. How has technology influenced the theory and practice of management? How may evolving technology influence management practice?
• Develop a plan for your personal approach to management that includes the skills and attributes a manager must possess. In this plan, explain how you would implement each function of management in your role as a manager.

The final paragraph (three or four sentences) of your initial post should summarize the one or two key points that you are making in your initial response.

Your posting should be the equivalent of 1 to 2 single-spaced pages (500–600 words) in length.

Start reviewing and responding to the postings of your classmates as early in the week as possible. Respond to at least two of your classmates. Participate in the discussion by asking a question, providing a statement of clarification, providing a point of view with a rationale, challenging an aspect of the discussion, or indicating a relationship between two or more lines of reasoning in the discussion. Complete your participation for this assignment by the end of the week.

Assignment (Case Study)

QUESTIONS

You are an investment adviser, working to build a foundation of wealth for your clients. One of your wealthiest clients already has a diversified portfolio, which includes managed funds, property; cash/fixed interest and a few direct share investments in Australia and around the world. The investor wishes to expand his/her portfolio and is considering your company's share to add to the portfolio. (The investor has an extra $10 million that wishes to invest into your company). The company which you will examine is allocated by your lecturer.

The assignment is a written comprehensive report and analysis of the firms' financial performance (including referencing).

You are required to do the following tasks:

1. Prepare a brief description of the company, outlining the core activities, the market(s) in which it operates within and any factors in the companies' history which you consider help present a “picture” of your company.

2. Specify ownership-governance structure of the company:

i) Name the main substantial shareholders:
– With higher than 20.00% of shareholdings. Based on this argument you should classify a firm as a family or non-family company, and
– With higher than 5.00% of shareholdings.

ii) Name the main people involved in the firm governance:
– The Chairman
– Board members
– CEO.
o Whether any of these people have the same surname as any of substantial shareholders (>20% share capital). If yes- you could use this as an argument for the presence of an owner or family member(s) in the firm's governance.
o Whether any of shareholders with more than 5% share capital are involved in firm governance.

3. Calculate the following key ratios for your selected company for the past 4 years. Annual reports are accessible via company websites (show all working out):
i) Return on Assets (ROA) = (NPAT / Total Assets)
Return on Equity (ROE) = (Net Profit After Tax / Ordinary Equity)

Debt Ratio        =          Total Liabilities / Total Assets

EBIT

x

NPAT x

TA

=

NPAT

TA

EBIT

OE

OE

ii) Explain what phenomenon is being “captured” by the variable TA/OE, and how it is impacting on the relationship between Return on Assets and Return on Owners Equity.
iii) Explain why the ROE (EBIT) is significantly greater than or less than the ROA (EBIT).

4. Using the information from the ASX website you must complete the following tasks:
i) Prepare a graph / chart for movements in the monthly share price over the last two years for the company that you are investigating. Plot them against movements in the All Ordinaries Index.
ii) Write a report which compares movements in the companies' share price index to the All Ords Index. For instance, how closely correlated is the line with the All Ords Index. Above or below? More or less volatile?

5. Research via the internet or financial/business publications:
From research via the internet (using credible sources) or financial/business publications, note any significant announcements which may have influenced the share price of your company. These factors could include merger activities, divestitures, changes in management's earnings forecasts, changes in analysts' forecasts, unusual write-offs or abnormal items, macroeconomic factors, industry wide factors, significant management changes, changes in the focus of the company, impact of competitors or law suits etc. (Restrict the number of announcements to 5).

6. Go online to reuters and type in the code for your company into the Search Stocks field and click on the magnifying glass button.
i) What is their calculated beta (β) for your company?
ii) If the risk free rate is 4% and the market risk premium is 6%, use the Capital Asset Pricing Model (CAPM) to calculate the required rate of return for the companies' shares.
iii) Is the company you have chosen a “conservative” investment? Explain your answer.

7. Weighted Average Cost of Capital (WACC)
i) Using information from the latest company report for the company (i.e. interest rate on their major source of long-term loans) and the estimated cost of equity capital calculated (in part 6ii above), calculate the WACC for your company.
ii) Explain the implications that a higher WACC has on management's evaluation on prospective investment projects.

8. Consider the debt ratio for your company over the past two years:

i) Does it appear to be working towards the maintenance of a preferred optimal capital structure? (i.e., does it appear to be “stable”?). Explain your answer.

ii) What have they done to adjust/amend their gearing ratio? Increase or repay borrowings? Issue or buy back shares? Has the Director's Report given any information as to why they have made any adjustments?

9. Dividend policy

Discuss what dividend policy of the management of the company appears to be implemented. Explain any reason related to that particular dividend policy.

10. Based on your analysis above, write a letter of recommendation to your client, providing an explanation as why you would like to include this company in his/her investment portfolio. Please refer to the ratio results calculated earlier and any other trends or factors that you believe to be important.

11. Formal structure and referencing.

Company name: ADX ENERGY LTD
asx code : ADX
GICS industry group: Energy