Bega Cheese Company Case Study

Share prices of a company reflects it is financial performance. Factors as liquidity and profitability have a major impact on how investors read the financial performance of a company and it drive their decisions on whether to invest in that company or not. Other factors that can be considered as external factors might affect the financial performance of a company and consequently affect its share prices. This study will focus on chosen internal and external factors that had affected the share price of Bega Cheese ltd for the last five years.

Bega Cheese Ltd, is a cheese and dairy company that is totally owned and operated by Australians. Established in 1899 as the Bega Co-operative Creamery Company, Bega cheese is currently on the list of

Profitability is the organization’s ability to generate profit from it resources. Company profitability is a key attraction for investors that would increase demand on company share and consequently increase the company share price. Profitability can be measured by return on assets “ROA”, return on equity “ROE” and net profit margin ‘Assessment of the profitability of a company is made on the basis of financial profitability ratios. The ratios measure economic effectiveness” (Rutkowska-Ziarko, 2014). ROA, is a financial ration that shows the company ability to generate profit out the used asset. Murniati (2016) found the higher the ROA of a company, the higher the value of the company 's assets and lead to higher stock prices as much in demand by investors. ROE, measures the ability of a company to generate profit on a certain equity. Although, there is no clear link between ROE and stock prices, Rotblut (2013) believe that it works effectively when combined with other indicators. He explained that ROE provide a quantitative measurement of management 's effectiveness at generating profits from a company 's net assets which lead to better trust on the company capability to generate profit and consequently higher demand on its share. Net profit margin is the percentage of revenue that business left with after paying all the expenses. The net profit margin is a clear evidence to the company performance ‘The higher the net profit margin ratio, the better is the profitability

The impact of commodity prices on share prices has been somehow overlooked. Empirical studies that touched this particular factor mostly focused on the impact of fuel prices volatility on stock market. In the same link, in a study of the impact of commodity prices on the Australian stock market ASX, (Heaton, Milunovich, Pass-de Silva, 2011) found that commodity prices are accounted for 9% of the variation of the stock market. To be more specific on this study, a review of the effect of commodity price impact on agriculture firms will be more appropriate. (Guo & Ma 2007) suggested that a sharp rise in prices of agricultural commodities would greatly restrict the rapid increase of farmers’ income. (Jiao-Hua & Chang-Jian 2013) suggested the same result which means that increase in agricultural prices will adversely affect the farmers’ income and rural economy. As a result, a strong believe has been established about the impact of commodity prices on income and how it reflects on dairy and agriculture firms profit