Business after the Iraqi WarWritten by Carlos T. Fernandez
The rewarding of high compensation packages to top executives who turned over weak quarterly earnings, or who were involved in corporate scandals, adversely affected short-term investing, and collectively contributed to downturn of global economy over last couple of years. Even help and expertise of Federal Reserve Chairman Alan Greenspan and several notable Nobel Prize winning economists in President's Council of Economic Advisers, wasn't enough to revive economy. September 11 then turned our attention towards terrorist threats against markets.Many, including Bush administration, believed that a short war was answer to both of these enormous problems. That is, if done quickly, a war would induce an increase in government spending that will be injected into economy and a multiplier effect will, in turn, create jobs for unemployed. But now that it's over and coalition forces have taken control of Iraq, should we expect to return to business as usual? Unfortunately, this is easier said than done. The facts are that underlying and axiomatic problems are still present in global economy. First and foremost, we have America's account deficit, which is increasing by second. The cost of war is certainly adding to this burden and is currently hovering at approximately $20 billion dollars. Some experts say that this cost could reach up to $95 billion dollars. We, inevitably, will have to pick up majority of this bill.
| | Financial tools that investors should apply to investment decisionsWritten by Andy George
The early parts of this century were painful years for most foreign investors with world markets falling significantly. I believe it is important that investors pay more attention to fundamentals when making their investment decisions. The purpose of this article is to highlight main financial tools that investors should apply when making investment decisions.PRICE EARNINGS RATIO The most important ratio that investors should look at is Price Earnings (P/E) Ratio. In layman’s terms this is share price divided by profit per share. The P/E Ratio of a Company should be compared against other companies in sector and against market as a whole. I also believe a good test is to compare P/E Ratio of a company with other similar companies quoted on other international stock exchanges. The P/E Ratio to be used in investment decisions should be prospective P/E Ratio and not historical P/E Ratio. Unfortunately in most of financial press P/E Ratio stated is historic one that may not reflect future prospects of a business. Hence investors should look at P/E Ratio based on current and future earnings and not previous year’s figure. An illustration of how an investor could properly carry out this exercise is as follows: A food retailer has a Prospective P/E Ratio of 10 times. It is currently expanding into all towns in Cyprus by opening new supermarkets. Its main competitor in Cyprus is estimated to have a Prospective P/E Ratio of 15 times. When one compares rating to other international quoted businesses in same sector one has found that these businesses command a P/E Rating of 20 times. This information would appear to indicate that investor should seriously consider an investment in this company since there is a case to suggest it is under valued. NET ASSET VALUE (NAV): A useful ratio for evaluation of investment companies is net asset value per share. In Cyprus most companies disclose their NAV on a two weekly basis whereas some companies go as for as to disclose figure on a weekly basis. In my opinion, those companies that have an NAV that is lower than share price should be tread on carefully by investors since they have a higher risk. The opposite is true for investment companies that are at a huge discount to their NAV.
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