Top Down Fundamental Analysis Samples †MyAssignmenthelp.com

Question: Discuss about the Top Down Fundamental Analysis. Answer: Top Down Fundamental Analysis Of The Overall Economic Environment Fundamental analysis is defined as the analysis of the financial position and the financial performance of the company through the financial statements. The main areas of consideration are the assets, liabilities and the earnings of the company along with the conditions of the market prevailing at that time and the working of the competitors. The fundamental analysis is conducted through two approaches one is Top down and other one is Bottom up. In the top down approach, analysis starts with the economy for the company at the global level, then at the domestic level, then the analysis of the particular sector and the industry in which the particular company is operating and at the last the business of the company is analysed. In this section, the analysis has been done through top down approach. In other words, this approach takes the bigger things first and the smaller at the last. The fundamental analysis is usually done with the annual financial report of the company as it contains the financial statement of the company along with the future plans of the company according to the market conditions. In the following manner the top down approach has been conducted for two companies namely Australian Pharmaceuticals Industries Limited and Mayne Pharma Limited. Both are in the sector of pharmaceuticals. Global Economy The world has faced the various tragedies relating to the pharmaceutical industry in the year of 1950s and 1960s due to which the new laws and procedures and the related guidelines have been provided by the government of Australia (Singh, 2017). At this level, the major emphasis has been made on the economies of scale present across the globe. The research question under this level is that whether the economies across the globe are in recession or not. As per the Australian Industry report for the year 2016, the forecast for the growth at global level has been reduced from 3.8% to 3.1% which shows that the economy at the global level is in recession (DOI Australia, 2016). The effect of the same has been mentioned in the annual report of both the companies that the industry in which the company is operating has become competitive and there are fewer chances for the growth as new and upcoming companies are entering into the market. As the GDP rate has come down on the g lobal basis, there are fewer chances of improvement and the future expansions. Domestic Economy Under this heading, the economy of the country of Australia is analysed with regard to the medicine industry. As per the Australian Industry report for the year 2016, Australia has developed the industry growth centre which is known in an abbreviated form as IGCs for different industries (Shaw, 2008). It facilitates the entrepreneurship and the innovation rather than making the industry dependent on others. The IGC relating to the medicine industry has been known by the name of MTP Connect and its main aim is to drive the industry to grow in terms of the innovative technologies, commercialization and the future expansion. Its second aim is to make Australia as the Asia Pacific hub for the medical and pharmaceutical companies. Following are the major factors which are considered while conducting the analysis at domestic level: Foreign Currency Fluctuation - In the given two companies, both companies have their operations in different parts of the World. The first company Australian Pharmaceuticals limited have the operations in New Zealand as well as in Australia and other company Mayne Pharma Limited have the operation in Australia as well as in United States. As the medicines are sold across the world, the chances of having the foreign exchange fluctuations will be high. The former company has recorded the gain on exchange differences of $3161000 AUD whereas the latter has recorded the gain of $1990000 AUD. It depicts that both the companies are growing and hence the medicine industry at domestic level is growing. Employment The industry has shown the growth in the rate of employment in the medicine sector. As Mayne Pharma Limited has employed more than 700 plus staff across its offices. The unemployment rate in Australia is lower as 5.6% though in the past six years it has been stagnant. It depicts that Australia is capable of generating more opportunities for work. Government Role As per the PWC Survey on the Pharma industry of Australia, it has been noticed that the industry has been facing various challenges regarding the policies of the Government and most of them has not even taking the benefit of various schemes notified by the Government like listing on Pharmaceuticals benefits scheme due to long dawn and never ending procedure (Boyce, 2015). In the annual report of the Australian Pharmaceuticals limited, it has been mentioned that the further price deflation has been recorded with the reforms in the pharmaceuticals benefits scheme. Mayne Pharma Limited has not made the disclosure regarding the benefits scheme. Specific Sector and Industry Both companies are related to the Manufacturing sector, the sector has contributed 99.4 million Australian dollars to the country out of 1400 million dollars of all the industry. Individual Business The financial statements of the both the companies have been analysed and following has been inferred: Australian Pharmaceutical Limited has recorded the profit before income tax at AUD $49837 for the year ending 30th of June 2017 and Mayne Pharma Limited has recorded the profit before income tax at AUD $68909 for the year ending 30th of June 2017. It depicts that the company is growing despite of the fact of having low procedures at the government and the declining GDP rate. Australian Pharmaceutical Limited has recorded the employee benefit expense at AUD $22402 for the year ending 30th of June 2017 and Mayne Pharma Limited has recorded the employee benefit expense at AUD $81389 for the year ending 30th of June 2017. It shows that the company has been generating the employment opportunities. Mayne Pharma Limited has spent AUD $2222 in the research and development expense in the year ending 30th of June 2016 which shows that the company has been growing and thus contributing to the development of the industry and the country of Australia. From the above top bottom analysis, it is concluded that the pharmaceutical sector has been growing and contributing to the development of country. References DOI Australia, (2016), Australian Industry Report 2016, available at https://industry.gov.au/Office-of-the-Chief-Economist/Publications/AustralianIndustryReport/assets/Australian-Industry-Report-2016.pdf accessed on 06/09/2017. Shaw B, (2008), Australian Pharmaceutical Industry at a Crossroad? available at https://medicinesaustralia.com.au/files/2009/12/Australian-Pharmaceutical-Industry-Report-2007.pdf accessed on 06/09/2017 Singh R, (2017), Financial Management in Pharmaceutical Industry, available at https://www.slideshare.net/dentobizz/drricha-project-cfm accessed on 07/09/2017. Boyce J, (2015), PWC Pharma Industry Surveys Highlights available at https://medicinesaustralia.com.au/media-release/2015-pwc-pharma-industry-survey-highlights-challenges-for-innovative-medicines-sector/ accessed on 06/09/2017.