Invest in Networking Capital - Account Receivables and Inventories - Finance Assignment Help

Assignment Task:

Question 1:
Collect (1) the closing prices of two stocks from different sectors in the main board of Bursa Malaysia and (2) Kuala Lumpur Composite Index (KLCI). Write down their full name and their codes in order to register the two stocks with your lecturer before starting doing the assignment. For example, you choose a company called HONG LEONG BANK BHD and its code is 5819.

Guideline to retrieve the data of 2 stocks and KLCI: 
1. Once registered the 2 stocks, key in the stock code in “Quote lookup”. For example, 5819.kl and click search. 

2. Once you are in Hong Leong Bank Berhad page, click on “Historical data”. Select the Time period “1/1/2000 to 1/1/2019”, Show “Historical price and Frequency “Monthly”. Once done, click “Apply”. 

We name these two stocks Stock 1 and Stock 2, and answer the following questions by using the statistical or mathematical software, including SPSS, Excel, or others: 

a. Calculate the annual returns of Stock 1, Stock 2, and KLCI from the year 2010 to the year 2013. For simplicity, you might ignore the dividend payments in your calculation. 

b. Use the annual returns calculated in Part a to calculate average annual returns and standard deviation of the annual returns for Stock 1, Stock 2, and KLCI.  

c. Determine the betas of Stock 1 and Stock 2 using the annual returns calculated in Part a. Comment on your results.

d. Form a portfolio called Portfolio P which invests 30 per cent of your funds in Stock 1 and 70 per cent in Stock 2. Calculate the average annual return, standard deviation, and beta for Portfolio P. Explain your results. 

e. If the Capital Asset Pricing Model holds for Stock 1, Stock 2, and Portfolio P, is it good to buy? Evaluate them one by one and provide a proper explanation on your results. Assuming the risk-free rate is 2%. 

Question 2:

What are the implications if a company under-invest in net working capital? 

Question 3:

Is it true that the operations of a company run more smoothly the more current assets it has? Should a company then operate with huge amounts of account receivables and inventories? Discuss.

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