SJSU Financial Management Theory and Policy WSJ Bloomberg Articles Essay

I would like you to find THREE recent (nothing earlier than January 2020, and preferably very recent) news stories that relate to material we have covered in the book.(http://course.sdu.edu.cn/G2S/eWebEditor/uploadfile…) For each story, either paste the link or write the title of the article (you do not need to write a formal bibliography), and then provide no more than two paragraphs on how the article related to the course. You can also add some additional information (see what this means in the example I give below when I write “I learned in class that…….”). The stories should cover different topics: in other words, do not send me three stories on the bond market. Once again, see a small sample assignment below.

TIPS: The best source is probably the Wall Street Journal or Bloomberg, but any reliable financial source is acceptable (Financial Times, Forbes, CNBC, Economist, etc.). There are alternate ways to access them:

1. Many stories in the Wall Street Journal are not available for free, use the ‘business’, ‘markets’, ‘tech’ tabs to work your way to find stories related to class.

2. Google the exact title of the story. Sometimes other sites pick up the story and present it in full.

3. Another source is the CFO Journal. Just google “CFO Journal”.

Other free sources:https://www.wsj.com/http://www.bloomberg.com/http://finance.yahoo.com/http://www.msn.com/en-us/moneyhttp://seekingalpha.com/http://www.cnbc.com/

Here is a sample of what I would consider a solid (B+)

Article 1: I googled WSJ Journal and browsing through major headlines found a story titled ”Stocks Fall Sharply as Federal Reserve Decision Sparks Growth Concerns.” When I clicked the story, I could not read the full story, so I just copied and googled the title. One of the links that popped up (you may need to click a few to get to the story) allowed me to read the story. (You should not write what I have written in underline: it was to show you one way to get around the issue of a story not having free access!). The article describes the United States central bank’s (the FED’s) recent decision not to raise interest rates and to further evaluate the impact of raising rates on the U.S. economy. I learned in class that when interest rates rise, the prices of existing bonds and other financial assets fall. However, the reaction to the decision not to raise the interest rates led to stock prices falling. Although at first the market reaction seems opposite to the fundamental relationship between rates and prices I learned in class, I also learned that the price of the stock depends on the projected growth of a company. As the article mentions, the investors interpreted the Fed’s decision as a pessimistic outlook on the U.S. economy. If investors revised the projected growth rates downwards, the stock prices were also revised downwards, which was evident in the market reaction. Additionally, in class I learned about systematic and unsystematic risk. Systematic risk affects all securities, while unsystematic risk only affects a particular class of assets. The article describes how stock market overall suffered after the Fed’s announcement. One of the reasons the Fed is waiting to raise the rates is due to China’s slowing growth. Negative outlook on China affected all securities, which is an example of the systematic risk. The article also mentions that the banking sector was even more affected because the banks were to benefit from the rising interest rates (the income for banks is the interest on loans, so the higher the rates, the higher the income). This observation showed the effect of the unsystematic risk affecting the banks.

Link to the article: http://www.wsj.com/articles/shares-fall-after-fed-reserve-keeps-rates-on-hold-1442563519


Article 2: I googled IPO in Google search and clicked on News. First article I saw is “Schaeffler Plans IPO to Cut Debt, Said to Raise $3.4 Billion” from Bloomberg. This German company is planning to conduct an initial public offering (IPO) this year in an effort to raise 3 billion euros. I learned in class that this is a primary market transaction in which the corporation will receive the funds raised to finance projects. However, the motivation for this IPO is to reduce debt that the firm incurred when it purchased a stake in Continental AG during the credit crunch. The capital raised through an IPO is to be used to pay down the outstanding debt, which totaled 6.24 billion euros. What I find interesting in the article is that the company is also planning to start paying dividends. Even if the debt is paid down, the interest liability remains and additionally 25% to 35% of the net income is planned to be distributed to the shareholders. Is it a financially sound strategy? Will this company be able to continue to pay down the debt and also have funds to finance future growth?

Link to the article: http://www.bloomberg.com/news/articles/2015-09-20/german-manufacturer-schaeffler-said-to-plan-ipo-to-pay-down-debt




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