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Summarising the company’s stock value change

Question:

Discuss about the Oxford Handbook of Economic Geography.

The assessment mainly depicts the overall financial position of Accenture Computers over the period by evaluating its share price and financial report. In addition, the summary of company’s stock value from period is evaluated. Moreover, the cash flow per share are also calculated over the period, where actual wealth retained by the company can be seen. Furthermore, the strength and weakness of currency is also evaluated with the help of graph, where required rate of return is depicted of Accenture Computers. The currency valuation of USD against CAD, GBP and EUR is conducted to identify decline or increment in its valuation against its international peers. Lastly, the discussion on causes of price change is discussed in the assessment for Accenture Computers.

Summarising the company’s stock value change from 31 August 2017 to March 8 2018:

Date

Close

Return

8/31/2017

130.76

 

3/8/2018

158.5

21.21%


The above calculation mainly helps in depicting the overall change in share price of Accenture Computers from 31 August 2017 to March 8 2018. This relevant increment is value of the company is at the level of 21.21%, where its share price increased from 130.76 to 158.5. This relevantly indicates the overall expectations of the investors regarding returns provided by the company. The relevant increment in share value of Accenture within the pervious year is due to the rise in comprehensive income of the company. The net income mainly increased from 2,743,925,000 in 2015 to 4,091,974,000 in 2016 (Accenture.com, 2018). This boosted the overall return, which could be provided by the company to its investors and raised its share value. This increment in overall revenues directly allowed Accenture to boost their net income and raise the level of dividend payouts to its investors. The high dividend paid by the organization mainly raised the overall expectations of the investors, which raise the value of shares and boosted share price of the company for the period.

Stating and discussing the company’s cash flow per share over last 4 years:

Particulars

2014

2015

2016

2017

Cash flow

4,921,305,000

 4,360,766,000

 4,905,609,000

 4,126,860,000

Dividends

1,254,916,000

 1,353,471,000

 1,438,138,000

 1,567,578,000

Shares outstanding

 634,216,250

 626,799,586

 624,797,820

 620,104,250

Cash flow Per Share

 5.7810

 4.7979

 5.5497

 4.1272


The overall table mainly helps in identifying the calculation of cash flow per share that is being distributed by the company over the period. The cash flow for share has a relatively decreased from 2014 to 2017, as retention of actual cash balance by the organization has declined over the period. This is mainly due to the high dividends that is being provided by the company due to high income generated from operations. The cash flow per share has declined from 5.781 to 4. 1272 over the period of 4 years which indicates that the maintenance of cash flow that is being conducted by the company has declined according to its outstanding shares. The share outstanding of Accenture has relatively declined over the period, however the dividend payment has increased, which relatively reduces capability of the company to retain adequate cash in its operations. In this context, Borio, Gambacorta  & Hofmann (2017) mentioned that high payments of dividend decline overall cash that is currently present within the organization.

Stating and discussing the company’s cash flow per share

Estimating the percentage of company’s revenue comes from domestic and international sales:

Particulars

North America

Europe

Growth Markets

Total

Revenues

17,254,753

12,555,672

6,955,053

36,765,478

Percentage of revenues

46.93%

34.15%

18.92%

100.00%


The above table directly helps in detecting the overall revenues that is being generated by Accenture in both home and international. The revenue is mainly divided in 3 different segments, which consists of North America, Europe, and growth markets. The services provided by Accenture ranges all over the world, which boosts the overall income of the organization. North American revenues 46.93% of the total revenue that is generated by the company, while Europe consist of 34.15% of its total sales. The rest of the revenues over generated from growth markets that was being used by Accenture to sell its products. The high sales are mainly conducted on the home country, where 17,254,753 revenues are owned by the organization (Accenture.com, 2018). This indicates that strengthening of international market why Accenture would eventually allow the organization to improve its revenue generation capacity. Moreover, the evaluation also indicates that Europe is second largest market for Accenture, which allows the computer company to generate adequate sales and replenish its cash flow. Frieden (2015) stated that detection of overall revenue generating sectors might allow the management to take adequate steps for increasing its market share.

Discussing whether US/CDN dollar strengthen/weaken over the last 3 months versus other major world currencies:

From the valuation of above figure relevant strength of USD against Canadian dollar, Euro, and GBP can be identified. moreover, it could be identified that USD value has relatively declined for all the three foreign currencies over the period of 3 months.  USD/CDN has declined by -0.34%, while USD/EUR has declined by -4.38% and USD/GBP has declined by -3.68% (Xe.com, 2018). This a relatively portrays the overall volatility in the currency market, which deteriorates the US currency against its International peers. The graph directly helps in identifying the weakening of US currency against its peers, which might hamper profitability of multinational companies operating from US. Major weakness can be seen in Eurozone, as after the Brexit relevant buying of euro currency for trees and Europe has strengthened the overall Euro against his peers. Furthermore, the second highest loss in currency value of USD is from GBP, as it is competing to be one of the internationally recognized currency.

Discussing the type of exposures that is presented in financial report of the company:

Foreign exchange Hedge is mainly used by Accenture for reducing the negative impact of currency conversion peanuts balance sheet. Besides, forward contract note is relatively used by the organization to hedge its overall foreign exchange exposure.  this ratably helps in reducing the negative impact that might increase from fluctuating foreign exchange rates. Moreover, the organization uses exchange instruments which is relatively short term in nature, which matures in one year. These short-term trades mainly allow Accenture to effectively realize gains or losses in the current fiscal year and does not increase the time duration of the financial instrument.  Currently Accenture has derivatives with net gain of $66,748 for fiscal 2017 and a net loss of $84,293 and $257,783 for fiscal 2016 and 2015. From the evaluation of the annual report it would be identified that relevant farewell use of the derivatives used by Accenture are at $177,057 in 2017, while at $95,829 in 2016 (Accenture.com, 2018). This indicates that relevant valuation of the derivatives has increased over the period and allowed the organization to gain adequate net income from its exposure of foreign currency market.

Estimating the percentage of company’s revenue comes from domestic and international sales

On further evaluation of the annual report it could be seen that total Assets on derivatives market is relatively higher than the overall liabilities of the company. this indicates the positive attribute, which might help the organization to reduce the negative impact from foreign currency fluctuations. Maximum of the wealth that is acquired by Accenture is from international business, which requires adequate investments in derivatives and foreign exchange market. Therefore, by using forward contracts, Accenture is able to increase its notional value of derivatives from $7,604,486 in 2016 to $9,290,345 in 2017.

Trying the estimate company’s required rate of return or its cost of capital:

Particulars

Value

Market Return

15.25%

Beta

0.98

Risk free return

2.89%

Required rate of return

15.00%


From the overall evaluation of above table relevant calculation of required rate of return can be detected for Accenture. The required rate of return is mainly at the levels of 15%, which is due to the beta of Accenture and the impact it has on its share. The market return of NYSE index has a relatively been detected at the levels of 15.25% for the period of 1 year, while the risk-free return is detected to be at the levels of 2.89%. Both the values are relatively used in calculating the required rate of return with the help of CAPM formula. Avdjiev, McCauley & Shin (2016) stated that with the help of CAPM calculation investors can detect the required rate of return or cost of equity of a company and identifies the minimum returns which need to be provided by the stock. With CAPM the rate of return that is needed by Accenture is 15%, as beta of the company is relatively close to 1, which indicates the highest level of risk involved in investments.

Discussing the causes of company’s stock to change from 31 August 2017 to March 8 2018:

The first and foremost reason for the changing prices of Accenture is due to the increment in net income and revenues of the organization during the fiscal year. The results published by the organization during the end of face value in 2017 mainly depicted its financial strength to the investors. This is relatively increased the share value of the organization due to high demand from investors. The second foremost reason is the high dividend that is being paid by the organization during the fiscal year. This has boosted the relevant demand of the company among investors the expectation of high dividends and growth. On the other news, Accenture opens innovation hub in Zurich, which is allowed the organization to capture More market and increase its profitability. Accenture was selected by Walt Disney Studios as an innovative partner, which helped in boosting its revenues (Reuters.com, 2018). The last relevant news was the selection of Accenture by Hershey company to support growth plans and accelerate innovation in the process.  these accomplishments during the year has allowed the organization to effectively increase its share price. The news depicted in the above statements fueled in the overall growth and Expectations of investors, which boosted share price of Accenture from 130.78 in 2017 to 158.5 in 2018.

Conclusion:

From the overall evaluation the financial performance of Accenture relatively increased over the period of one fiscal year, which boosted its share price. The financial performance has relatively improved seeing the overall jump in net income and revenue of the organization. The Other valuations such as cash per share has relatively declined over the period due to low accumulation of cash within the organization. The company has adequately use the currency exposure for reducing any kind of negative impact from currency market. this is relatively help in increasing derivative value and reducing any kind of losses, which might incur from volatile currency market.

Reference and Bibliography:

Accenture.com. (2018). Accenture.com. Retrieved 10 March 2018, from https://www.accenture.com/us-en/company-annual-report

Avdjiev, S., McCauley, R. N., & Shin, H. S. (2016). Breaking free of the triple coincidence in international finance. Economic Policy, 31(87), 409-451.

Bloomberg.com. (2018). Bloomberg.com. Retrieved 10 March 2018, from https://www.bloomberg.com/asia

Borio, C., Gambacorta, L., & Hofmann, B. (2017). The influence of monetary policy on bank profitability. International Finance, 20(1), 48-63.

Cheung, Y. W., Chinn, M., & Nong, X. (2017). Estimating currency misalignment using the Penn effect: It is not as simple as it looks. International Finance, 20(3), 222-242.

Chinn, M., & Kucko, K. (2015). The predictive power of the yield curve across countries and time. International Finance, 18(2), 129-156.

Frieden, J. (2015). Banking on the world: the politics of American international finance. Routledge.

Frisari, G., & Stadelmann, M. (2015). De-risking concentrated solar power in emerging markets: The role of policies and international finance institutions. Energy Policy, 82, 12-22.

Gambacorta, L., Illes, A., & Lombardi, M. J. (2015). Has the Transmission of Policy Rates to Lending Rates Changed in the Wake of the Global Financial Crisis?. International Finance, 18(3), 263-280.

Reuters.com. (2018). ${Instrument_CompanyName} ${Instrument_Ric} Quote| Reuters.com. U.S.. Retrieved 10 March 2018, from https://www.reuters.com/finance/stocks/overview/ACN.N

Titman, S., Keown, A. J., & Martin, J. D. (2017). Financial management: Principles and applications. Pearson.

Wojcik, D. (2018). The New Oxford Handbook of Economic Geography. Oxford University Press.

Xe.com. (2018). Xe.com. Retrieved 10 March 2018, from https://www.xe.com/

Zaghini, A. (2014). Bank bonds: size, systemic relevance and the sovereign. International Finance, 17(2), 161-184.

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