Depict Financial Stability Company Is Good â€Myassignmenthelp.Com

Question: Discuss About The Depict Financial Stability Company Is Good? Answer: Introduction: Security investigation is must for every financial analyst and the investor as the dividends and the performance of the company depends over the security of a firm. Various ways are there to investigate the performance of the security as well identify the position, stability and performance of the company. Mainly, an investor looks over the performance of the company through technical analysis and fundamental analysis. In technical analysis, security price is analyzed and in fundamental analysis, financial analysis of the company is analyzed. In this report, both the analysis has been done to analyze the performance of the IRESS Company of Australia. IRESS Limited: IRESS limited is an Australian company. This company is specialized in the developing of software system and it offers various services of wealth management and financial market. This company offers services to financial institutions, stockholders and research analysts (IRESS, 2017). The head office of the company is situated in Melbourne, Australia. This company offers its services into global market as well. The revenue of the company is AUD 389, accounting to the annual report, 2016. This company holds around 19.5% of ASX. Calculation of WACC: Weighted average cost of capital is a technique to identify the total cost of the company in terms of payment to the equity holders and debt holders. WACC focuses over various factors to analyze the total cost of the firm. Following are the way to analyze the WACC of the company: Return on equity (Ke): Return on equity (ke) is analyzed by the company to identify the total cost of the company in terms of equity only. In this, the total amount paid by the company to the equity holders in terms of dividend is analyzed and it has been found that how much amount would company paid to the equity holder. Two methods have been analyzed for this report. Which are as follows? Dividend discount model: This model is calculated to identify the total cost of equity in terms of expected dividend, current price of the company, growth rate of the company etc (Morningstar, 2017). through this calculations, it has been found that the total cost of equity of IRESS is 0.1447. CAPM Model: This model is calculated to identify the total cost of equity in terms of risk free rate, beta, market return etc (Morningstar, 2017). Through these calculations, it has been found that the total cost of equity of IRESS is 2.437%. Return on debt: Return on debt (kd) is analyzed by the company to identify the total cost of the company in terms of debt only. In this, the total amount paid by the company to the debt holders in terms of interest is analyzed and it has been found that how much amount would company paid to the debt holder. Through these calculations, it has been found that the total cost of debt of IRESS is 2.72%. Risk free rate: Australias government bond depict that the risk free rate of country of 10 years is 2.75% (Bloomberg, 2017). G (Growth rate): Growth rate of the company has been analyzed and it has been found that the return of the company is enhancing by 14%. Coefficients of Beta: Beta coefficient of an organization depict about the fluctuations in the companys return in terms of the industry return. Through these calculations of Beta coefficient, it has been found that the total beta of the company is 0.2013. WACC analysis: Through the various calculations such as risk free rate, market return, beta, cost of debt, cost of equity etc has been analyzed so that the total cost of the company to enhancing the funds of the company could be found. Currently, the WACC of IRESS is 0.0253. In that the total of debt of the company is 0.00922 and the total cost of equity is 0.0161 (yahoo finance, 2017). The weight of the debt is quite lower than the debt of the equity. Thus the cost of debt is lower than the cost of equity. Calculation of gearing ratios: Gearing ratios are the techniques to analyze the performance of the company and stability of the company in context of debt, equity, total assets, current liabilities etc. the formula of gearing ratios are as follows: Where the capital employed is calculated as follows: Capital Employed = Total assets- current liabilities Through calculating the gearing ratios of the company, it has been found that the total gearing ratio is 0.33937 of the company which is quite lower. This depict that the company is enough stable. The risk level of the company is lower than the normal risk. Further, the cost of the company is the 0.0253 (Reuters, 2017). Gearing ratio of the company depends over the current liabilities, total assets, long term liabilities etc. the debt weight of the company is lower than the equity weight and thus the level of the risk is very lower. Company could reduce the level of cost by economics the equity funds more as the cost of equity is lower than the cost of debt. There are not much difficulties linked with the calculation of gearing ratios. It is quite easy for an analyst to identify the gearing ratio of a company. Findings: Through the reports, it has been investigated that the WACC of IRESS is 0.0253. In that the total of debt of the company is 0.00922 and the total cost of equity is 0.0161 (yahoo finance, 2017). The weight of the debt is quite lower than the debt of the equity. Thus the cost of debt is lower than the cost of equity. Through these reports, it has been found that the company could reduce the level of cost by enchaining the equity funds more as the cost of equity is lower than the cost of debt. Recommendation: To conclude, it has been found that the company is quite stable and the risk level of the company is also lower. The WACC of the company depict that the total cost of the company is lower as well as the gearing ratios depict that the financial stability of the company is good. References: Bloomberg. (2017). Australian bonds and rates. https://www.bloomberg.com/markets/rates-bonds/government-bonds/australia on 26th Sept 2017. Morningstar. (2017). IRESS limited. Viewed from https://financials.morningstar.com/balance-sheet/bs.html?t=IREregion=ausculture=en-US on 26th Sept 2017. Reuters. (2017). IRESS limited. Viewed from https://www.reuters.com/finance/stocks/overview?symbol=IRE.AX on 26h Sept 2017. IRESS limited. (2017). Home. Viewed from https://www.iress.com/au/ on 26th Sept 2017. Yahoo Finance. (2017). IRESS limited. Viewed from https://finance.yahoo.com/quote/IRE.AX/history?period1=1309458600period2=1467225000interval=1mofilter=historyfrequency=1mo on 26th Sept 2017