Answer

BBPW3103
FINANCIAL MANAGEMENT I
Assingment 1
1. Discuss the benefits of having investment in equity, investment in debt securities and
investment in properties.
1.1 Meaning of investment equity is which money that invested in a company by purchasing
shares of that company in the stock market. These shares are typically traded on a stock
exchange. (www.blackrock.com)
There have 6 advantages of equity investment :
1. Capital gains, income and dividend which the share price of the company rises or the company
makes a profit, you will receive a return on investment in terms of capital gains and dividends:
these are the 2 main sources of income on your investments.
2. Limited liability which is we shares is limited to the extent of the investment made in a
company. When the company incurs loss above your investment, you don’t have to bear that
loss.

3. Exercise Control When you own shares of a company, you gain ownership of that company.
This gives you voting rights in the company.

4. Bonus shares: On some occasions, companies decide to issue bonus shares to its existing
shareholders. These shares are free shares which you receive.

5. Liquidity: The shares you buy in a stock market have high liquidity. This means your shares
can be easily transferred to a different owner. Contrast this with a real estate investment, which
would be significantly more difficult to transfer.

6. Stock Split: Sometimes, companies decide to split their stocks into parts. This reduces the
share price of the company but your capital holding remains the same. The major advantage of
this is that it increases the liquidity of the share.

2. An investment of equity has some benefit especially for growing business such as small
business are paramount to the economy, they need all the help to grow it. So equity investment is
the best way and suppose their business is in a position, in other hand, equity investment also can
provide necessary resources new business to achieve their ambition dan dream. Some benefit of
equity investment are :

1.2 Large capital which the primary benefit to increase value of the initial amount invited in the
business and it is has less risk using equity investment to finance your business because no need
to take it loans or use debt, financing to attain the necessary funds needed for a company growth,
it also can help to increase the capital base without accumulating credit problem
In the investment equity also be follow-up funding. By investing in your business, investors
become part-owners; as such, they are usually concerned about the state of their investment and
willing to provide additional funding to make the company grow and develop. Meanwhile, the
capital will increase then reflected in the company growth through create new product, increase
market equity and company strategy change,

2. No debt, one of the main advantages of equity investment is start up owner does not have to be
burdened of loans which it can be detrimental ot the growth of the business to repayment of the
loans, so that, the business owner secures and less risk through equity investment. When start ups
can make benefit from this because the first few months may be not experience get a positive
result from the cash flow. This issue of no debt repayment is also essential during the initial
periods of the start-up because, as mentioned above, start-ups do not qualify for bank loans.
Also, investors usually do not expect immediate returns on their investments, making it an
altogether safer route for start-ups. 

3. Three element such expert, skill and network are apart of the money that equity investment
brings in and growing business which is benefit come from the investors` knowledge. The
investors may be good sources of advice and contracts that why growing business usually look
from investor through sector or management experience that their can benefit it, if we get the
right investors a business can growth and achieve ambition and dream in the short time. So that
they are willing to work as hard as possible to maximize the company growth, when they have
guidance. Experience and business acumen can help a business achieve its visons and be the best
it can be. (www.europeanbusinessreview.com)

Debt securities investment can define as refers to financial instruments that contain a promise
from the issuer to pay the holder a defined amount by a specific date, i.e., the point at which the
debt security matures. which means that ownership can be transferred from one party to another
easily. Bonds (government, corporate, or municipal) are one of the most common types of debt
securities, but there are many different examples of debt securities, including preferred stock,
collateralized debt obligations, euro commercial paper, and mortgage-backed securities. There
are many benefit and advantages debt securities for investors, firstly, they are designed to
designed investors with repayment of their initial capital investment, plus interest, upon
maturation. In other hand it also important  to remember that they provide guaranteed, regular
payments through interest, providing a steady stream of income. Finally, debt securities can be
an effective way and helping manage risk.( https://gocardless.com) /

1.3 An investment property is a piece of real estate acquired with the intent of generating a profit
through rental income, potential resale of the property, or both. An individual investor, a group
of investors, or a company can own the property. Real estate acquired for investment purposes is
referred to as an investment property. Investors typically rent out the property and use the rental
income to pay off their loan, with the goal of owning the asset and potentially creating capital
growth by selling it at a higher price than when they first bought it.
The Benefits of Investment in properties, there have 6, which are :

1. Steady Income
Investment in real estate is primarily for the steady flow of cash in the form of rental income.
This passive income is a huge incentive to get you started and buy your first rental property.
Depending on the location, you could be earning significant income to cover your expenses and
make you extra money on the side. Urban cities or towns with colleges and universities tend to
reap higher income because the demand is always high in those areas.

2. Long Term Financial Security

The benefits of investing in real estate provide investors with long term financial security. When
you have a steady flow of cash in succession, the rewards of this investment bring on financial
rewards for a long time. Owning a rental property can afford investors a sense of security
because of the property’s appreciation in value over time. This means that your property’s value
is most likely going to increase because land and buildings are appreciating assets. With that
said, however, there is no guarantee the value will increase indefinitely.

3. Tax Benefits
One of the benefits of investing in real estate is the tax exemptions investors get from owning a
rental property. This is a major reason why many choose to invest in real estate. For example,
rental income is not subject to self-employment tax. In addition, the government offers tax
breaks for property depreciation, insurance, maintenance repairs, travel expenses, legal fees, and
property taxes. Real estate investors are also entitled to lower tax rates for their long term
investments.

4. Mortgage Payments Are Covered

The benefits of investing in real estate include your tenants as well. Simply put, the rental
income you receive each month is more than enough to cover your expenses, including your
mortgage payments. Essentially, your tenant is actually the one paying your mortgage.

5. Real Estate Appreciation

The benefits of investing in real estate include the appreciation of capital asset over time. In
other words, your property’s value will be worth way more 20 or 30 years from now, hence why
investors are in it for the long run.

6. Inflation
One of the benefits of investing in real estate is a hedge against inflation. With high inflation,
your rental income and property value increase significantly. Real estate investors welcome
inflation with open arms because as the cost of living goes up, so does their cash flow.
2. Discuss the risks of having investment in equity, investment in debt securities and investment in
properties.

Each of investment have risk. Same too investment equity, investment in debt securities and
investment in properties. Below is types of risk having an investment:

1. Market risk, which The risk of investments declining in value because of economic
developments or other events that affect the entire market. The main types of market
risk are equity risk, interest rate risk and currency risk.

2.  Liquidity risk which is the risk of being unable to sell your investment at a fair price and get
your money out when you want to. To sell the investment, you may need to accept a lower price.
In some cases, such as exempt market investments, it may not be possible to sell the investment
at all.

3. Concentration risk which the risk of loss because your money is concentrated in 1 investment
or type of investment. When you diversify your investments, you spread the risk over different
types of investments, industries and geographic locations.

4. Credit riskThe risk that the government entity or company that issued the bond will run into
financial difficulties and won’t be able to pay the interest or repay the principal at
maturity. Credit risk applies to debt investments such as bonds. You can evaluate credit risk by
looking at the credit rating of the bond. For example, long-term Malaysia government bonds
have a credit rating of AAA, which indicates the lowest possible credit risk.

5. Reinvestment risk which is the risk of loss from reinvesting principal or income at a lower
interest rate. Suppose you buy a bond paying 5%. Reinvestment risk will affect you if interest
rates drop and you have to reinvest the regular interest payments at 4%. Reinvestment risk will
also apply if the bond matures and you have to reinvest the principal at less than 5%.
Reinvestment risk will not apply if you intend to spend the regular interest payments or the
principal at maturity.

6. Inflation risk which is the risk of a loss in your purchasing power because the value of your
investments does not keep up with inflation. Inflation erodes the purchasing power of money
over time – the same amount of money will buy fewer goods and services. Inflation risk is
particularly relevant if you own cash or debt investments like bonds. Shares offer some
protection against inflation because most companies can increase the prices they charge to their
customers. Share prices should therefore rise in line with inflation. Real estate also offers some
protection because landlords can increase rents over time.
3. Discuss the factors influencing investors’ decision to invest in equity, debt securities, and
properties.

Equities is termed as a valuable part of investment portfolio, by having stocks in different companies
helps build savings, protect money from inflation and taxes as well as maximizing the income from
the investment (Biddle, 2012).

It is evident that long-term equity has better returns as compared to fixed-cash investments such as
the bonds. Investors prefer long-term investment since the stock-market fluctuations smooth out
after a long period of time. There is assured return on capital which is a major benefit of investing in
debt securities. The investment has a regular stream of income from interest payments (Gruić,
2012). These interests also provide the investor with a continuous stream of income throughout the
year. The investment in properties is beneficial in that the real estate investors make money profits
through rental income, property or land appreciation and returns generated by business activities
which are depended on the property. Some of the major benefits of investing in properties include
stable cash from the property, passive income, tax advantages, leverage to increase potential of
return incomes and provides means for diversification in investments.

On the other hand, there are some risks involved in investing in these investments. The stock prices
are not stable and usually rise and fall over time (Girard, 2007). Notably, investing in equities is
accompanied by higher risk than investing in cash or bonds. Though, equities have higher potentials
for higher returns and understanding the risks helps in proper decision making pertaining to the
investment (Mason, 2007).

The rising interest rates pose great investment in debt securities. The rise results in falling bond
prices and reflects the ability of investors opting for better interest elsewhere. Point to note is that
lower bond prices result in higher yields or returns as opposed to higher interest rates. The purchase
of investment property brings the risk of dealing with the tenants in running the business and as well
as risk of damaging the property by the tenants (Deininger, 2003). The most preferred property for
investment is usually the real estate investment (Dunlap2012). This comes several benefits with
lower running cost and higher returns

Conclusion.

All investment have advantages and disadvantages, so as a investor must make the best decision
making which investment With the exponential increase of the digital economy in the 21st
century, it is obvious that the relationship between customers and corporations has experienced a
paradigm shift. Thus, there is no longer passive participation amongst customers. Customers are
becoming more involved with companies they patronize. Growing businesses can utilize that to
raise funds for their business. Using the above-mentioned tools start-ups can create an exciting
avenue to turn their clients into investors in their companies. Growing businesses can financially
align themselves with the community, allowing clients who believe in them to invest and earn as
the company grows.
Assingment 1
1.      Write the introduction of the selected companies.

Tenaga Nasional Berhad -

 As the largest electricity utility in Malaysia, we are a key contributor to Nation
building.
 In recent years, we have also embarked on our sustainability agenda through
efforts such as renewable energy and other environmental as well as social
initiatives as we seek to add value to all our stakeholders.
 We believe these activities will not only take Tenaga Nasional Berhad (TNB) into
the future, but also continue to grow our business in the long term as we transform
ourselves into to be one of the world's top 10 global utility by 2025
Axiata Group Berhad -
 As one of the leading regional telecommunications groups, Axiata is driven by
our purpose of Advancing Asia through digital innovation and technology. In
order to capitalise on opportunities from the global digital revolution, Axiata has
evolved from a holding entity with a portfolio of pure-play mobile assets.
 Today Operating Companies (OpCos) across our footprint provide digital telco
services to mobile, home and enterprise customers; digital businesses offer digital
financial services, digital advertising and digital platform; and our towerco
provides infrastructure solutions and services.
 With more than 12,9761 employees from diverse nationalities and cultures
forming our dynamic talent base, we are guided by our Uncompromising
Integrity, Exceptional Performance (UI.EP) values in all that we do.
 We are committed to creating value-driven outcomes for our stakeholders in line
with our 4P Goals.
2.      Discuss the disclosure of the capital structure of both companies in their financial
statements.
Capital structure is as below
Analyse how the capital structure affects the performance of both companies.
As seen above, Tenaga Nasional Berhad has 43.38% of capital from Debt and has
a relatively lower borrowings rate than equity return. It therefore impacts the
company positively by leveraging the funds
Axiata Group Berhad has lower debt as a % of capital since it has very high
borrowing cost. This impacts the ROE negatively

3. What is the summary of the assignment?

Tenaga Nasional Berhad - The company is having ROE of 7.64% and Borrowings
cost of 7.45%. It is therefore leveraging borrowings to multiply its earningsAxiata
Group Berhad - The company is having ROE of 8.17 % and Borrowings cost of
18.91 %. It can therefore delevarage its borrowings to multiply its earnings