The Business Report of the ANZ Bank

Introduction of the ANZ Bank

         The ANZ Bank is a multinational banking service providing institute. The ANZ Bank is headquartered in Australia. Although, it also works in New Zealand. ANZ Bank is listed in the Australian stock exchange for the sell of its equity. In this report, financial information and financing decisions of the bank are analyzed in detail. The beta is calculated based on regression analysis. While the value of beta is used to represent regression analysis [a statistical test] with relevant financial ratios of the bank. The present work also includes details about the observation of graphs.

Meaning of Beta of the ANZ Bank

           The beta is a commonly used term in the business The meaning behind this term are different. For instance, in the business CAPM model, the term beta represents volatility. While in the securities and stock analysis it also represents the systematic risk factor. Organizations use beta values to project possible risk factors for investment in the stock equity of a company. Somehow, shares are traded on the market values which can fluctuate in response to several internal and external environmental factors such as the company's reputation, inflation rate, or natural events. While beta mainly shows the volatility in the share prices of a company over the time duration because of these factors, therefore, beta is considered as a representative of risk factor associated with stock (Montgomery, Peck, & Vining, 2013).

Type of Beta of the ANZ Bank

             Beta has some common types such as debt beta, equity beta, and asset. In part 1, we have calculated the equity beta for the ANZ Bank. Somehow, our analysis also relates to asset beta and debt beta. The equity beta is the measure of stock price volatility in the selected time duration. The higher level of volatility represents a greater risk for investment therefore investors measure beta to understand the stock price trend. In part 1 of this project, stock price volatility is calculated. While the stock prices are also taken to measure the risk beta by the use of statistical testing “regression analysis”. Therefore it can be said that the found beta in part 1 was an equity beta.

Meaning of The Financial Ratios of the ANZ Bank

The financial ratios used in the analysis are a debt to equity ratio, times interest earned ratio, price to earnings ratio and market value to book value ratio. The meanings of these financial ratios are presented below (Accountingtools.com, 2018):

1)      Debt to Equity Ratio

The debt to equity ratio is a measure to represent the level of business operation financed by the debt versus equity.

2)      Times Interest Earned Ratio

The time interest earned ratio is meant to provide information about the company’s capability to meet its debt obligations while using its current income (Tracy, 2012).

3)      Price to earnings ratio

The price to earnings ratio shows how much investors of common stock holders will earn on each dollar they spent in the company's assets. A higher ratio indicates higher earnings for each dollar of assets [including the plant assets and non-current assets e.g. inventory].

4)      Market value to book value

The market value to book value ratio is also named as book ratio. This ratio is a representative of the difference between the company's calculated value or worth in the reports against calculated value by the market.

Meaning of R-Square of The Regression

              Statistical measures are commonly in use of business administration and managers to evaluate the impact of a variable on the second variable. Regression analysis is mainly the statistical measures representing variance and difference between two variables. R-squared regression shows the level of closeness between the selected variables. For instance, in this case, it measures how close the beta values are to the calculated ratio. In the community of researchers, an R square value greater than 50% is considered acceptable. Somehow, in business analysis (such as for beta we used) even a 30% regression value is also important as companies do not afford to a wrong decision in the highly competitive markets.

R-Square and The P-Value For The Slope

          The R-square and p-value are the two indicators of regression analysis to represent a slope. The following table represents the results of regression analysis in the R-square and p-value taken in part 1 for ANZ Bank [based on the financial data from 2010 to 2019]. The comment of these values is presented below in detail.

Table 1 R-Square Value and P-value

Detailed Comment:

              Based on the above presented R-square value and p-value of the beta vs P/E it can be said that the tested relationship is significant as the alpha value is greater than p-value (0.0086). Thus it is clear that changes occurred in the values of beta also bring changes in the values of price to earnings ratio for the relevant time duration. While on the other, the relationship between beta values and debt to equity is also significant. The r-square value for beta vs D/E is 0.3144 which is greater than the p-value 0.0917.

                Thus conclusively it can be said that a strong and significant regressive relationship exists between these two selected variables. In the third row, the r-square and p-value are presented for beta vs TIE. The regression is insignificant for beta and times interest earned. Although, the results are insignificant for the beta vs MV/BV variables as p-value is greater than the alpha value.

Observation of The Graphs of the ANZ Bank

           The observation of the graph represents that values of price earnings ratio [for ANZ Bank] and beta are correlated. Both of these variables were representing an increase and decrease at the same time duration therefore it can be said that both are correlated with each other. While the graphs also show that beta movement and times interest earned ratio had a huge difference over the selected time duration. The time interest earned ratio values were between 40 to 50. However, beta values were lower than 3. Thus, in this graph beta line for ANZ Bank was all-the time stick to the bottom area.

             Moreover, based on the observation of line chart showing debt to equity and beta graph it can be said that debt to equity had a negative or opposite trend of movement than beta values during 10 year duration. Somehow, the values of both of these variables are between 0.5 to 2.5. Because of similar values, the trend is quite clear in this line chart. However, the debt to equity ratio is not representing an overall increasing trend. Debt to equity ratio was only stable during 2013 and 2016 from overall selected time duration.  

Conclusion of the ANZ Bank

           The whole discussion concludes that the regression model and financial ratio analysis are the common methods employed by the managerial staff of the organizations to evaluate the business performance and financial outcomes. The beta and financial ratios are also calculated for ANZ Bank. The beta is a measure for volatility which also indicate risk factor. In this report, equity beta related analysis are presented in detail. Summarizing findings, price to earnings ratio has a significant relationship with beta. The regression analysis also concluded that market value to book value ratio does not have any significant relationship with the beta as p-value was lower than the alpha value.