Investment is the way by which individuals try to increase their money or wealth through delaying their consumption of goods and services for later time in future through purchasing financial instruments or other assets that will in returns provide them with return in form of : interest, dividends or capital gains. Through investment investor required a return that compensates him for the time the money is committed, the inflation rate and the uncertainty of future payments. According to that investors expect to receive returns on future for his investments. Figure [ 1 ] the risk return trade off
One of the most important concepts that any investor should realized is the risk return trade off. Risk is the possibility that actual return of investment will be different than the expected return. The principle of such concept says that for any investor who is willing to increase his money the relationship between risk and return is positive. This means that for every increase in risk there is an increase in potential return. According to that investors who seek high amount of return should be willing to bear a high risk. In the other hand investor who is taking low risk should know that he would get low potential returns. So lowering or increasing your returns will depend in the amount of risk you can handle. However, as risk means higher potential returns, also it means higher potential losses. According to that Every investor must know his risk tolerance when choosing investment for his portfolio which will depend on his goals, income and other personal situation . Also he must finds the appropriate balance between risk and desired returns. That means that he must decide the amount of risk while at the same time become comfortable about his investments. This report will analyze the performance of Galfar Engineering which is listed in Muscat Securities Market (MSM). It will be divided into 5 sections which are: * Over view about the MSM-30 index and industrial sector. * Over view about Galfar Engineering.
* Analysis of the performance of Galfar Engineering compared with the industrial sector performance and the MSM-30 index. * Analysis of some ratios related to the financial statements of Galfar Engineering for 2011 and2010. * Recommendation about Galfar Engineering (Good, Bad, or Average) Based on the analysis The result from this report will provide the investors with an opinion about Galfar in term of wither to invest on it or not. Section# 1:
Over view about the MSM-30 index and industrial sector
1-General over view about index and constructing an index:
Rather than observing the performance of each securities index is an easy way by which investors use it as benchmark to judge the performance of their portfolios. Index is a measure which uses statistical methods to measure the change in a portfolio. The index measured risk returns are for the total market or some component of the market. To construct any index it follows the following steps:
* We take small sample of the market (companies listed in the market) that should be representative of the total market. Considering in the sample its size, width and source. * Assign a weight to each item in the index. The weight can be either according to the price of company stock or through the value of the company (price of share*number of issued shares) or through assigning no weight to the companies in the index and considering them equals. * Decide on calculation procedures. Either arithmetic or geometric mean or through price and value changes. Index can be improved through:
* Putting CAP > limiting the effect of large capitalization companies in the index * Concentrate in shares traded
* Allow foreign companies be part of the index
2-Over view about the MSM-30:
MSM30 Index was established 1992 and it is used by many investors and individuals as benchmarks to judge their portfolios performances and...