Essay: Analysis Of SEO And IPOs - Equity Offerings Comparison.

Data Set and Analysis

Most companies trade shares on the stock market. Many old firms issue new shares in addition to those shares which trade on the stock market. These new shares are referred to as the seasoned equity offerings (SEO). We have some firms which have never traded in the shares on the stock market before and may be interested in trading on the shares. The shares they issue to go to the public for sales are referred to as the initial public offerings (IPO). All the companies invest in shares to raise some money which may be used in the expansion of the company or for future investment.

The investors and the other financial economists are normally interested in understanding how the stock market values the shares from any firm. The value of any firm’s shares in the stock market is a major determinant of the number of investors who invest in the firm. High values of a firm’s shares in the stock market attract many investors to the firm since the investors will expect high future profits from the firm.

To determine the totals of the values of the outstanding shares, the debts, the sales, the income, and assets of all the 309 firms who sold their shares in 1996 in the United States.

To determine the average of the values of the outstanding shares, the debts, the sales, the income, and the assets of the 309 firms who sold their shares in the United States in 1996.

To compare the totals of the values of all the outstanding shares, the debts, the sales, the income, and the assets of all the 309 firms using a bar graph.

To compare the averages of the values of the outstanding shares, the debts, the sales, the income, and the assets of all the 309 firms using a bar graph.

Is the total value of the sales of the firms obtained in 1996 higher than the total value of the long-term debts held by the firms?

Is the average value of the sales of the firms obtained 1996 higher than the average value of the long-term debts held by the firms?

Is the total value of the assets higher than the total value of all the outstanding shares?

Is the average value of the assets higher than the average value of all the outstanding shares?

The total value of the long-term debts held by the firms is higher than the total value of the sales obtained by the firms in 1996.

Comparison of Totals and Averages

The average value of the long-term debts held by the firms is higher than the average of sales obtained by the firms in 1996.

The total value of all the outstanding shares is higher than the total value of the assets of the firms.

The average value of all the outstanding shares is higher than the average value of the assets of the firms.

In this research, we are going to analyze the data set given in the file EQUITY.TXT. This data contains all the data of the values of all the outstanding shares which were sold by all the 309 firms, the debts, the sales, the income, and the assets of all the 309 firms. 

We will use the Excel tools to calculate the totals and the average of the values of the outstanding shares, the total of the debts, the totals of the sales, the total of the income, and the total of the assets of all the firms. We will also draw bar graphs to compare the totals and the average of the values of the outstanding shares, the debts, the sales, the income, and the assets. Microsoft Excel will also help us to calculate other statistical measures on the provided data. It will also help us to do a regression analysis on the data.  All these analyses of the data will help us to get the solutions of the research questions and enable us to test and analyze our hypothesis.

From the analysis done on the Excel workbook, we obtain the following tables which summarize our findings.

A table showing the totals and the average values of all the 309 firms

	Value	Debt	Sales	Income	Assets
Totals	203402.9	48214.7	113816	3625.7	554443.5
Average	658.2618	156.0346	368.3366	11.73366	1794.316

	Value	Debt	Sales	Income	Assets
Standard deviation	2324.344	464.6068	1225.538	55.54626	23805.45
Sample Variance	5402577	215859.4	1501944	3085.387	5.67E+08
Maximum Value	38396.6	4541	16121.5	449	418371
Minimum value	13.7	0.1	0.1	-432.3	1
Range	38382.9	4540.9	16121.4	881.3	418370
Median	244	7.8	81	3.5	100.3
Mode	120.6	0.1	0.6	0.6	4.7
Skewness	14.19183	5.744292	8.525107	2.197062	17.51169
Kurtosis	227.5098	39.70688	94.16868	35.67179	307.4153
Standard error	132.2273	26.43056	69.71844	3.159916	1354.245

In the regression model, we are going to take the value of the outstanding shares to be the dependent variable while the sales and the income are taken to be the independent variables

The Regression Analysis table obtained from Excel

The value of R square is 0.254099 (25.4099%) which will result in poor regression line.

The value of significance F is 3.84E-20 which is okay since it is less than 0.05

The coefficients are 352.0768, 0.330298, and 15.76695. The coefficients indicates the relationship between the value of outstanding shares, the sales, and the income.

The totals of the values of the outstanding shares, the debts, the sales, the income, and the assets of all the 309 firms can be compared as shown in the bar graph shown below.

Regression Analysis

The average of the values of the outstanding shares, the debts, the sales, the income, and the assets of all the 309 firms can be compared as shown in the bar graph shown below.

From the analysis above, we can deduce the following facts:

The total value of the long-term debt is 48214.7 million US dollars while the total value of sales obtained by the firms in 1996 is 113816 million US dollars. From these values, we can see the total value of the sales of 1996 is higher than the total value of the long-term debts.

The average value of the long-term debt is 156.0346 million US dollars while the average of the sales obtained is 368.3366 million US dollars which shows that the average value of the sales is higher than the average value of the long-term debts.

The total value of all the outstanding shares issued in 1996 is 203402.9 million US dollars while the total value of the assets is 554443.5 million US dollars. This shows that the total value of the assets is higher than the total value of all the outstanding shares.

The average value of the outstanding shares issued is 658.2618 million US dollars while the average value of the assets is 1794.316 million US dollars which shows the average value of the assets is higher than the average value of the outstanding shares issued.

Debts are usually the amount of money borrowed by people or organizations. Debts are normally represented by bonds, loan notes, mortgage or other forms which state the repayment terms and the interest requirements if applicable (What is Debt? definition and meaning). It is important for the organizations to settle all their debts or have minimum debts for the organizations to grow and become more successful (The Federal Trade Commission, 2012).

The sales made by the companies come in many different forms of goods or services. Higher sales in the companies normally generate more profits to the companies which help in the expansion of the companies. This attracts more investors to the businesses as the expanding businesses have a great potential of earning the investors more profits in the future.

As seen from the given data, the total value and the average value of the sales are higher than the total value and the average value of the long-term debts. This is a positive and a desirable feature of the companies as it is required to minimize the debts and maximize the sales for the companies to keep growing and expanding more. 

Discussion of Findings

Assets are valuable items which are owned by entities or companies and can be used to generate income for the entities (Viljoen-Smook, 2009). On the other hand, shares are the record books or certificates which normally represent the ownership of a company or any organization (Morris, 2007). Any company is required to have a good quantity of assets which will generate some income for the company when needed. The companies normally sell their shares to the investors for the sake of increasing its income. However, it is recommended that the number of assets of the companies should always be higher than the shares sold by the company at any time. In our data, we realize that the total value and the average value of the assets are higher than the total value and the average value of the outstanding shares of the companies.

This research report has been limited by various aspects. Some of the limitations of the report include:

The given data contains the shares’ values, the debts, the sales, the income, and the assets of only one year (1996). This limits our comparison capabilities since we can’t compare these data with the data of the previous years.

The given data does not specify the companies involved. This makes it hard to know the data of the individual companies to make the necessary analysis and comparisons.

Another limitation of the report is the large size of the sample size. The big size of the sample (309) makes it so difficult to analyze the data of each company independently. This also makes the comparison of the individual company’s performances very difficult.

Another limitation which has limited our research is the restriction of the size of the report. We have so much research and analysis which can be done about the shares sold by the companies, but the research is restricted by the size of the report.

The provision of the data has also been a limitation in the report. The students are limited to using the provided data and are not supposed to do some more research about the data.

Conclusion

From the research report, we can draw the following useful conclusions:

Companies always trade in shares in the stock market to realize some financial benefits.

Companies always try to have minimal or no debts for them to keep on growing and expanding more.

Companies have some assets which can be used to generate some income for the companies when necessary.

Companies always work hard to increase their sales to realize more profits which will help them to keep on growing.

References

Blue Fox Communications. (2017). Research Limitations. Retrieved from psychologyandsociety.com: https://www.psychologyandsociety.com/index.html

Brammer Stephen, B. C. (2009). The Quarterly Review of Economics and Finance, 49(3), 1065-1080.

Charts in Excel. (n.d.). Retrieved from Excel-easy.com: https://www.excel-easy.com/data-analysis/charts.html

Creswell. (2008). Educational Research: Planning, conducting, and evaluating quantitative and qualitative research. Pearson.

Hoang, P. (2007). Business and Management.

How to Buy Shares. (2012, February 23). Retrieved from ShareWorld.

McGranaghan, M. (2014). Guidelines on writing a research proposal.

Morris, V. B. (2007). Dictionary of financial terms. New York: Lightbulb Press.

Oikonomou, B. C. (2012). Financial Management, 483-515.

The Federal Trade Commission. (2012, November). Coping with Debt. Retrieved from Consumer Information: https://www.consumer.ftc.gov/articles/0150-coping-debt

Viljoen-Smook, G. a. (2009). Business dictionary . Kaapstad: Pharos.

What is Debt? definition and meaning. (n.d.). Retrieved from InvestorWords.com: https://www.investorwords.com/1313/debt.html

Wilson, N. a. (2013). Handbook for Artistic Research Education. Amsterdam: Valand Academy.