Analysing specific financial issues in Cable & Wireless Communications Essay

Analysing specific financial issues in Cable & Wireless Communications plc - Essay Example that are going to be included in the paper are: the stock market, company background, financial performance and investor values, gearing impact on investment, and the final summary section. The financial performance of the company will be evaluated over the last five years. The stock market is the most popular form of investment in the world. The largest and most liquid stock market in the United Kingdom is the London Stock Exchange (LSE). Once a firm is listed in the London Stock Exchange it becomes a public company. Investors can achieve investments in public companies by buying their common stock. Purchasing a common stock implies that the investor gain ownership in the company. To purchase common stocks a person must buy the stocks from a stockbroker. Due to advances in technology people today can purchase stocks using the services of online brokerage firms such as Scottrade. Scottrade charges its customers $7 per trade (Scottrade, 2014). The values of stocks sold in the stock market vary each minute while the market is open. Investing in the stock market can help a person gain wealth, but people must be aware that investing in common stocks is a high risk proposition. In order to lower the risk of investing in the stock market an investor must uti lize a diversification strategy. Diversification can be defined as spreading a portfolio over many investments to avoid excessive exposure to any one source of risk (Bodie, Kane, Marcus, 2002). The safest investment in common stocks that an investor can make is buying blue chip stocks. Blue chip stocks can be defined as a stock of a large, well-established and financially sound company that has operate for many years and whose market capitalization is in the billions of pounds (Investopedia, 2014). From the perspective of corporations the stock market serves the purpose of being a mechanism to raise money. Companies that become public enter the market through an initial public offering (IPO). Companies that already