8 research outputs found

    Share Price As Dependent Of Basic EPS Or DPS – A South African Perspective

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    Investors consider both earnings and dividend information when analysing the performance of an entity (Koppeschaar Koppeschaar, Sturdy, Du Toit, Deysel, Rossouw, Van Wyk, Gaie-Booysen, Papageorgiou, Smith & Van der Merwe, 2015). The objective of the study was to determine whether the share price performance of the top 40 JSE listed companies depend more on BEPS or DPS. The study focused on the top 40 JSE listed firms as sample, while data were collected for the period 2012 to 2016. Information was gathered on EPS, DPS and share prices with aid of the INET BFA database. Collected data were analysed through application of SPSS, by measuring Pearson correlation coefficients and performing paired t-tests. Study limitations included that the sample size was limited to 40 observations, that a limited analytic period was used (2012-2016) and that the study relied on the accuracy of information provided by the INET BFA. Generalisation of research findings is therefore limited. Despite limitations, the study made a worthy contribution by indicating that investors of the top 40 JSE listed firms should rather rely on earnings measures (BEPS) than return measures (DPS) when making investment decisions, because it was statistically proven that BEPS delivers higher Pearson correlation coefficients than DPS when correlations modelling is performed for the selected analytic period

    Viability of Risk-return Trade-off within a South African Context

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    Research aims: This study aimed to determine whether systematic risk and return are related to each other. It answered the research question: Is it realistic for investors to expect high returns when their investments are associated with more riskiness?Design/Methodology/Approach: Quantitative analysis was applied through a correlational research design. Secondary data were collected from the Integrated Real-time Equity System (IRESS). The Statistical Package for Social Sciences (SPSS) was utilised to measure a Pearson correlation coefficient and execute multiple regression analysis. This was done to test for the relationship between financial measurements of systematic risk and return, of sampled entities.Research findings: This research found that measures of systematic risk and return are not necessarily related when empirically analysed for sampled entities.Theoretical contribution/Originality: This paper indicated that the principle of the modern portfolio theory (MPT) should not be accepted as general truth. It should not be assumed that risk and return are linearly related in all financial markets under all economic circumstances. This premise is contrary to general financial management practice, where the MPT is universally accepted and even forms the basis of other financial theories.Research limitation: The use of the IRESS database posed a limitation in terms of sampling, as the database was frequently unable to present a complete set of data needed for statistical testing. Consequently, only 33 companies were sampled, as IRESS only made a complete set of required data available for these entities

    Exploring Budget usage by Small Businesses within a South African Township

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    The majority of unemployed South Africans reside in townships. Many individuals who start informal businesses do so because of their employment status. Budgets are generally recognised as management tools that possesses the capability to support the planning process and ensure efficient administration of assets. The aim of the study is to explore if small formal and informal business owners in the retail and service sectors in the township of Sharpeville make use of budgets as part of the managerial process. The first objective is to explore the usage and purpose of budgeting within small formal and informal businesses in Sharpeville. The second objective is to establish an understanding of whether budgeting is viewed as a tool for achieving business goals within small formal and informal businesses in Sharpeville. The third and final objective is to identify possible reasons for not using budgets by these small businesses in Sharpeville. The study is quantitative in nature where data were collected from 100 respondents through convenience sampling. A self-administered questionnaire was used as collection tool. IBM SPSS was applied to analyse and summarise the collected data. The results of this study revealed that formal and informal small business owners who operate in the retail and service sectors of Sharpeville, do not make use of budgets due to a lack of knowledge on how budgets should be prepared. This study indicates that small business owners do not possess the necessary knowledge to set budgets and stresses the need for accounting education for small formal and informal business owners. The findings in this study fill the knowledge gap with regards to the use of budgets by small businesses, concentrating on the retail and service sectors operating within the township of Sharpeville.   Keywords: Small, Micro and Medium Enterprises; Budgets; Formal and Informal Businesses, Township Businesses

    Is there an Association between Firm Size and Financial Performance?

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    Formulating organisational objectives and strategies such as ‘growing the firm’ and ‘improving financial performance’ is a common practice. This paper reiterates that the concepts of ‘firm size’ and ‘financial performance’ are not singular ideas. The study aimed to answer the research question: Is there an association between firm size and the financial performance of selected companies? A descriptive research design was applied, and quantitative analysis was performed. Secondary data were extracted from financial statements through IRESS. The research set out predetermined sampling criteria for sample selection. Correlations were measured between financial ratios and different proxies of firm size. Frequencies of the different significant correlations were counted. The findings indicated that firm size proxies and measures of financial performance were either directly or inversely related. Profitability measures were inversely related to total assets and sales. Liquidity measures were associated with sales, while solvency measures were associated with sales and number of employees. Measures of market performance were inversely associated with market capitalisation. This paper contributes to academic knowledge by indicating that financial data of sampled South African companies deliver associations between firm size proxies and financial performance measures. These associations are not identical to the findings obtained by other researchers in different locations. The practical implications of this research entail that managers of South African companies need to select financial performance indicators and base the firm size estimation on proxies associated with such financial performance indicators. Limitations included that findings cannot be generalised, that the researchers relied on the integrity of audited financial statements and that IRESS did not make a full set of data available for all sampled entities. Limitations may inspire further research as the methodology may be mimicked by selecting another research sample.     Keywords: financial performance; ratio analysis; firm size; JSE listed companies; financial ratios


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    The rapid and strong flow of economic development and competition has compelled businesses in both the informal and formal sectors to be competitive in every way. Cost volume profit analysis (CVP) has become an important management accounting principle in this rapid and strong economic flow. This is because cost volume profit analysis is a management accounting principle that may be used in planning, monitoring, and decision-making by forcing minibus taxi owners to evaluate future possibilities, anticipate openings in terms of opportunities and restructuring, and detect future risks. The purpose of this research paper is to investigate how minibus taxi owners in the informal sector apply CVP as a management accounting principle tool in operating their minibus taxi business. This research paper used a quantitative research methodology in the form of an online questionnaire to gather data from a census of 500 minibus taxi owners situated in the Emfuleni Local Municipality. This is a cross-sectional research paper with a location restriction. Data were collected in 2021. The data collection was restricted to the online environment, because of the COVID pandemic restriction. Following data collection, the information was synthesized into an excel file, a conformity check was performed, and data cleansing was completed. The Statistical Package for the Social Sciences version 27.0 software package was used to analyses the data. The results were displayed using descriptive tools such as pie charts and bar charts. The results of these descriptive tools show that most minibus taxi owners do not apply cost volume profit analysis when running their minibus taxi industry. Lastly, the research paper concludes by providing recommendations on how minibus taxi owners may apply CVP to their minibus taxi business.   Keywords: cost volume profit analysis - costs - volume - profits - minibus taxi industry

    The Effect Of Earnings Per Share Categories On Share Price Behavior: Some South African Evidence

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    Earnings per share (EPS) is considered as an important accounting indicator of risk, entity performance and corporate success. It is used to forecast potential growth in future share prices, because changes in EPS are often reflected in share price behaviour. Companies listed on the Johannesburg Share Exchange (JSE) are required to publish three different categories of EPS: basic, diluted and headline EPS. It has become apparent that there is no indication as to which category explains share price behaviour best. The study therefore aimed to determine which category of EPS is best associated with share prices of the top 40 JSE listed companies in South Africa. No South African studies have previously attempted to answer this question. The top 40 JSE listed companies were selected as the research sample and the relationship between different categories of EPS and share prices was analysed empirically for the period 2005 to 2013. This study demonstrated that basic EPS correlated best with the changing behaviour of share prices. Furthermore, the study established that headline EPS proved to deliver lower correlation coefficients than other EPS categories. Based on the findings of this study some useful recommendations and areas for further research were also identified

    Developing a systematic risk model for JSE listed companies

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    PhD (Accounting), North-West University, Vanderbijlpark CampusSince 1952, the modern portfolio theory (MPT) has dominated academic thought on the estimation of systematic risk. The MPT puts forward that systematic risk and return are positively and linearly interrelated. Although this notion has been widely accepted in financial theory and modelling, researchers have empirically questioned its viability since the 1960s. While the MPT has proven to be scientifically inadequate because it generalises the risk-return trade-off principle, some studies have yielded diverse findings, indicating that the type of market and the type of sample influence the degree to which risk and return are related and/or unrelated. Furthermore, the MPT does not provide explicit details on the quantification of ‘systematic risk’ or ‘return’. This leaves gaps for different interpretations, as users of financial information may quantify these concepts differently, which could, naturally, lead to diverse conclusions. This study was undertaken to determine whether systematic risk and return are interrelated for a sample of JSE listed companies. It set out to explore whether the assumed association between systematic risk and return has empirical substance from a South African standpoint, and whether other accountancy-related measures are able to better predict behaviour in systematic risk, in relation to sampled South African companies. The primary objective of the study was to develop a new systematic risk model, which consists of accountancy-related items other than returns, to predict leveraged and unleveraged systematic risk in selected JSE listed companies A mixed research methodology was applied, in the form of a triangular mixed research design. Specifically, the study applied a qualitative method (in the form of a systematic review) to seek support for the quantitative models constructed. The research objectives (both primary and secondary) were fulfilled through the execution of three research stages. The first stage empirically tested the relationship between systematic risk and accountancy-related return measures. It was statistically found that these return measures were not necessarily well associated with systematic risk proxies in the sample of JSE listed companies. To address this predicament, the second stage of the research process identified alternative measures which associate with systematic risk. These alternative measures were quantitatively modelled by applying multiple regression analysis. Stage 2 of the research found that aspects such as liquidity, cash flow per share, market value added, gearing, debt to assets, price to book value, price to net assets and return on external investments could predict both leveraged and unleveraged systematic risk in sampled companies. The third stage of the research process was undertaken to seek qualitative validation for the empirical findings of the study. This was done by qualitatively analysing similar research in order to explore whether previous studies could confirm the empirical findings. This means that other researchers have also observed similar patterns in the execution of their statistical analysis. Qualitative analysis was applied through systematic reviewing of peer-reviewed research articles published in accredited academic journals. This thesis contributes to financial theory by reminding the reader that generalised financial theories should not necessarily be accepted as gospel. Systematic risk is a complex concept and there is no ‘one-size-fits-all’ definition to enable the user to comprehend it. Users of financial statements will need to do on-going research in order to keep track of how systematic risk and its behaviour change under different circumstances, over different time spans and in different markets. Where financial managers and stock brokers adopt the risk-return trade-off oblivious of scientific and empirical findings, systematic risk and its estimation may not be tracked in a manner that is helpful to the investor. Ultimately, only statistical analysis can reflect the true state of systematic risk behaviour within a given time frame.Doctora