Essay: Comparison of stock returns of M&S and Beale

Essay: Comparison of stock returns of M&S and Beale
April 14, 2011 Comments Off on Essay: Comparison of stock returns of M&S and Beale Academic Papers on Business Studies,Sample Academic Papers admin

Sample Essay

From the above discussion, it is revealed that Marks and Spencer is using greater amount of debt in its total capital structure as compared to Beale. M&S is also having greater international trade while Beale is mainly confined to the United Kingdom market. Because of these factors the interest rates risk and currency fluctuation risks are also higher for M&S as compared to Beale.

From the risk management perspective, M&S is following an aggressive strategy in using the derivatives instruments. On the other hand, Beale has taken a conservatives stance pertaining to the use of financial instruments and is not using derivatives. However, company has some internal control factors like limiting the use of debt financing and restricting its trade to the national boundaries.

4.8 Trends in the stock price returns of two companies

The researcher has calculated stock returns of both the companies of the last five years from the stock exchange and then these are compared with the FTSE-350 past five years returns to know the volatility of the individual stock with the market. To measure the volatility of individual stock, its correlation, co-variance with market and beta are calculated. It is estimated that stock price of M&S has correlation and covariance with market as -0.157 and -0.00024 respectively. These results in case of Beale are different as expected. It is estimated that stock price of Beale has correlation and covariance with market prices as 0.16 and 0.000029 respectively. Although both the stock has very small values of correlation and covariance, yet the important point to note is that the stock prices of M&S are negatively correlated to the market while the Beale stock is positively related. They could be many possible reasons for the phenomenon. One thing which is very vivid from the financial analysis is that the company with derivative has less stock price exposure and hence volatility as compare to the company which don’t has such risk management arrangements.

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