UGBS FFA FINAL WORK.docx

Agency risk the risk that the management of a company

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Agency risk: the risk that the management of a company will use its authority to benefit itself rather than shareholders. Currency risk: The potential risk of loss from fluctuating foreign exchange rates when an investor has exposure to foreign exchange rates when an investor has exposure to foreign currency or in foreign-currency –traded investment. Strategy risk is the risk that failed business decisions, or lack thereof, may pose to a company. Commodity risk: Refers to the uncertainties of future market values and of the size of the future income, caused by the fluctuation in the prices of commodities. Equity risk is the financial risk involved in holding equity in a particular investment. 6 | P a g e
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QUESTION 6 CAPITAL ASSET PRICING MODEL 2013 2015 2017 Cost of equity=Rf + (Rm -Rf) 25.73% 24.97% 16.55% Ra = required rate of return of the asset Rf=the rate of return of GOG T-bills 0.245 0.2346 0.1754 Rm=the broad market’s expected rate of return 0.26 0.253 0.164500 = beta of the banking industry 0.82 0.82 0.82 ***beta taken from a research work of Ocran,2010 Rm=end of period - GSE financial stock index DIVIDEND DISCOUNT MODEL ('R)=(Div/P)+g 2014 2015 2016 r=Cost of equity 27% 25% 30% D=Dividend per shares 0.65 0.46 0.49 P=price of shares 3.15 4.12 2.50 g=growth rate of dividend 0.06 0.14 0.10 *growth rate of Div.=(D1/D0)-1 QUESTION 7) DIVIDEND POLICY Ecobank Ghana Ltd. has an unstable dividend policy. Their respective payout ratios have differed year-on-year for the period under review. 7 | P a g e
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Question 8) MANAGEMENT OF COMPONENTS OF WORKING CAPITAL Judging from the ratios for the last five years, Ecobank has maintained an efficient method of managing cash and cash- equivalent, loans and advances, depositors funds, and other timely payables. 8 | P a g e
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  • Summer '16
  • EMMANUEL
  • EcoBank, Curr. Assets- Other Assets

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