Financial markets and Investment Management - 1100 Words

Financial markets and Investment Management (Research Paper Sample) Content: Financial markets and Investment Management Student Name: Professorà ¢Ã¢â€š ¬Ã¢â€ž ¢s Name: Institution: Date: Table of Contents: 1 Introduction............................................................................................................1 2 Five-Year Stock Chart of Coca-Cola Company....................................................2 3 Revenue Drivers of Coca-Cola Company..............................................................2 4 Three-Year Ratio Chart w/5 Ratios of Coca-Cola Company..................................3 5 Industry and Industry Position of Coca-Cola Company..........................................3 6 DuPont Valuation Method.......................................................................................4 7 Conclusion..............................................................................................................4 8 References..............................................................................................................5 Introduction Coca-Cola is a multi-national Company that produces worldà ¢Ã¢â€š ¬Ã¢â€ž ¢s favourite soft drinks and beverages. The Coca-Cola Company views the world of Coca-Cola not only as source of income, but also as a $15 million public relation investment. Ultimately, the Coca-Cola Company would like the World of Coca-Cola to be a geographical icon for Coke, an image which instantly alarms the consumers at a very high note. Five-Year Stock Chart of Coca-Cola Company In the case study of Coca-Cola Company, this research shows the net variation in long-term in profitability attributable to new CEOs. The profitability of low performing firm continue to go down as opposed to high performing firm which their profit margins continued to improve regardless of existence of newly appointed leader. The he high performing firms that recommends the appointment of already existing employee to be the CEO tend to perform better than high performers that appointed outsiders, although the difference was statistically negligible Context Origin (%) Origin (%) Origin (%) Insiders Outsiders Total Low performers -7.8 (56) -6.19 (9) -7.61 (65) High performers 4.76 (24) 1.50 (10) 3.80 (34) Total -4.05 (80) -2.19 (19) . à ¢Ã†â€™Ã‚ ° Note: In each cell, the top number is the net change in profitability for pre- and post- succession. The number in parenthesis is the number of CEOs successions involved in the study. A corporate event such as a CEO change is seldom an isolated event; it is usually associated by a series of decisions and actions. A combination of actions, such as re-designing of top level management or putting in place a new mission, provides the stock market with new information. In connection to that, these changes help investors go through the impact of new leadership on a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s future performers. To tackle this issue, i witnessed variations in stock prices of Coca-Cola Company over after five years (Miller 1977). Low Performer Low performer High Performer High Performer Period (years) Insider Outsider Insider Outsider -50 to -25 .14% -6.10% 3.75% 2.83% -24 to -3 1.45 -4.00 .57 -2.93 -2.to +2 -0.02 -1.17 .70 3.70 +3 to +24 -0.91 -0.14 -2.58 5.75 +3 to +50 .88 -6.35 -0.29 -0.88 Total 1.55 -19.03 2.15 8.44 à ¢Ã†â€™Ã‚ ° Effects 0f Succession on Stock Prices Over Various Time Periods. Revenue Drivers of Coca-Cola Company The Coca-Cola Company has heated up an international war with her competitors to control a significant market share all over the world. For example, India, a nation with over one billion potential customers, has proved to be of the best ground for the cola wars. Five years ago, corporations have been fighting for the rights to use cricket stars as donors to fund "Bollywood" movies and to grab online relationships. Coca-Cola has been building commercial links with high profile Indian dignitaries in an effort to grab and control the most lucrative Indian markets. Similarly, as China has made its boarders free to international trade, Coca-Cola has aggressively shifted to ground itself. It has moved to establish distribution channels, manufacturing and bottling networks to offset the slow moving sale of soft drinks in United States. Sport sponsorships play a very vital role in marketing strategy of Coca-Cola Company. Over the past few decades, the Corporation has aligned its core brands with sport properties that they feel effectively deliver specific market segment. It ranks among the top 50 in sports advertising spending. In 2003, the Coca-Cola beverage department spent an estimated $64 million in sport sponsorship. U.S. sport property provides a very lucrative platform for the cola wars than the National Football League. It was until the 1980s that the National Football League began fully to realise the potential for additional revenues through licensing and corporate sponsorship (Mille, 1977). Three-Year Ratio Chart w/5 Ratios of Coca-Cola Company The Company uses the Morden portfolio Theory, which is the basis of todayà ¢Ã¢â€š ¬Ã¢â€ž ¢s portfolio theory. The first rule of MPT is that the financial portfolio manager select securities based on maximising the portfolioà ¢Ã¢â€š ¬Ã¢â€ž ¢s discounted returns. This rule, or a variation, seems vital and normally used by investor to select only securities with the highest returns in order that the sum of stocksà ¢Ã¢â€š ¬Ã¢â€ž ¢ expected returns will give the maximum aggregate portfolio return. As the correlation between two the two portfolios goes down, the risk return relationship becomes an arc between the two portfolios. When the portfolio are perfectly negatively correlated, meaning as one portfolio increases the other equally decreases, the arc is at its most distended( Botkin, 2007). Industry and Industry Position of Coca-Cola Company From the strategic point of view there are two vital points to the threat of entry. First, it changes, of course, as these conditions change. Product differenti...