ESCUELA POLITECNICA NACIONAL NOMBRE:

Dilemma: Stock market challenge

Task 1
March
It’s March 3lst and it’s 6pm. EU Airlines reports
losses over the last three months of 45 million
euros. The company has debts of 3 billion euros
and ticket sales are falling. This is partly due to a
downturn in the world economy, and partly due to
competition fforn low cost airlines. Frank Petit, the
airline’s CEO, has announced today that the
company is planning to cut costs. Four thousand
people will lose their jobs over the next year. The
share price rose to one euro eighty in January, but
has since fallen, and stands at one euro per share
today.
September
June
It’s June 30th and it’s 6pm. EU Airlines reports an
increase in profits over the last three months.
Thanks to a programme of cost cutting, profits for
the quarter reached 63 million euros. However, the
airline’s workforce are planning strikes in protest
against job cuts. These strikes will cause problems
for passengers which could result in a fall in ticket
sales. The share price has risen over the last three
months and reached a peak of two euros at the
beginning of June. But news of the planned strikes
has pushed the price down again and today it stands
at one euro sixty per share.
Task 2. December

It’s September 30th and it’s 6pm. EU Airlines
reports a big rise in profits over the last three
months, reaching a total of 125 million euros for the
quarter. Passenger numbers have increased
substantially to Asia and the Pacific, North and
South America, the Middle East and Africa. Only
numbers within Europe remain low because of
competition from low-cost airlines. The company
has solved its employee relations problems and the
strikes planned for the summer did not take place.
The share price has increased over the last three
months and has reached three euros fifty, the
highest level for the year so far.
It’s December 31st and it’s 6pm. EU Airlines has
reported a fall in profits over the last three
months, from 125 million euros in the third
quarter to just 65 million for the fourth quarter.
The recent rise in oil prices has put pressure on
the airlines to increase fares. As a result,
passenger numbers have fallen. And strikes at
three major airports during a holiday weekend
in November meant that many passengers were
not able to fly. The share price has fallen by more
than a third in the last quarter and
currently stands at two euros.

Brief: You are members of an investment Group. On January 1st you invested €30.000,00 in
sheres in EU Airlines Corporation (EUA), a European Airline.
The share price is €1.50 and you on 20.000 shares. You also have €50,000 which you could use to
buy more shares. Your task is to make as much money as you can from investment over a year.

Guide to making money on the stock challenge:

The key to making money on the stock market is to buy shares when the price is low
and sell again when the price is as high as possible.

But it is hard to know when the price has reached its highest point!!! Look at the company
profitability. When the companies are making big profits. Their shares usually sell at a higher
price. Factors leading to share price rises: growing markets, increasing sales, cost savings.
Factors leading to price falls: increasing competition, decreasing markets / sales, company
debts, employment problems (strikes,etc); rising cost of supplies

Q1 Q2 Q3 Q4
Value of Shares (Number of shares x Shares $0.00 $172000 $602000 $602000
Price) $86.000 $172000 No shares
Decision??? Buy / Sell / No Action Jan sell June sell Buy all No action
and June buy shares
March
buy