Profile Of A Corporation Essay, Research Paper
The industry for securities is undoubtedly an exciting and
fast paced industry. This means that brokerage firms such as A.G.
Edwards and Sons must always be watching the stock prices on every
stock in the market so that they can give their clients maximum
profit. When A.G. Edwards and Sons? clients do well then in turn so
does the brokerage firm. A.G. Edwards Inc. is not the biggest
corporations in America, but yet it is still a very large corporation
and has great importance in the industry for which it participates.
This paper will give an in depth explanation about how A.G. Edwards
functions as a corporation.
Along with competition from the government, banks and other
brokerage firms there is also probably the biggest factor involved of
interest rates. Interest rates are indi-rectly proportional to the
activity in the stock market. This means that when the interest rates
fall the market for securities becomes active. This is due to the fact
that people want the highest yield on there money and when interest
rates are low, investing money into a bank would yield less money then
it would have before at a higher interest rate. So people tend to want
to put there money into something that will give them a higher yield
and stocks are just that.
An example of this inversely proportional relationship is
always being demon-strated and was demonstrated in the past few years.
At the end of 1992 to the beginning of 1993 the volume in most
businesses was at record levels obtaining a pre-tax net income for the
whole industry of 9.1 billion dollars setting a new record for the
second year in a row (Hoover?s Company & Industry Database, 1993, p. 1
(Hoover, 1993,p.1)). This trend continued when in the beginning half
of 1993 offerings (new business for the com-pany) exceeded those of
1992 (Hoover,1993, p. 2). Examples of this are as follows; more than
700 billion dollars of debt was issued in 1992 and then in the first
half of 1993 an-other 440 billion dollars of debt was issued (Hoover,
1993, p. 2). More than half of this debt was due to asset-backed debt
such as credit cards and other charges made to credit (Hoover, 1993,
p. 2). These debts were included because the debts were more or less
sold to banks and other money lending institutions who were more
willing to take the risk for the high interest rate.
This drop in interest rates did wonders for the brokerage
firms involved and also corporations that had acquired debt over the
years. The fall of interest rates was great for the brokerage firms
because of the increase in business with the public?s desire to
invest. So the corporations used it to issue off more stock to the
public to pay off their debts (Hoover, 1993, p. 2). As if interest
rates didn?t have enough effect on brokerage firms, there is also the
heavy competition that was involved. This competition is not only from
other top brokerage firms such as Merrill Lynch, Morgan Stanley,
Primerica (Smith Barney Shearson), Salomon, and Goldman Sachs, but
there is also competition from big banks and securities over seas.
Banks have a number of ways to compete with security firms, but the
most prevalent and direct is through mutual funds. Since the late
1980?s banks have been aggressively competing with mutual fund
sponsors by issuing there own mutual funds to the public (Hoover,
1993, p. 3).
Mutual funds that are issued by banks are now the fastest
growing part of the mutual fund industry, with 10.6 percent of total
assets and 30 percent of new sales (Hoover, 1993, p. 3). There has
just recently been a large amount of competition from markets overseas
and this competition continues to increase. There are a few theories
as to what has caused so many U.S. investors to invest in foreign
markets. It is supposed that it is either individual investors who
want to further their portfolio or investing in foreign markets to try
and avoid interest rates and changes in currency (Hoover, 1993, p. 4).
The investment in foreign markets has also been attributed to
technology and the fact that up to date information can be obtained
instantly from any place in the world (Hoover, 1993, p. 4). But
whatever has caused it global securities have skyrocketed. Before the
organization and structure of the company a brief history and
explanation of the company will be discussed. A.G. Edwards & Sons
was founded in 1887 by Benjamin Franklin Edwards making A.G. Edwards &
Son the first St. Louis brokerage to handle trades for the local banks
on the New York Stock Exchange (Flagg, 1994, p. 56). Then three years
later Benjamin?s younger brother joined the company changing the name
to read A.G. Edwards & Sons (Flagg, 1994, p. 56). In 1898 Edwards
bought a seat on the NYSE and then in 1900 opened its first office in
New York (Flagg, 1994, p. 56). In 1925 Benjamin?s son joined the team
and later became a managing partner (Flagg, 1994, p. 56). One of A.G.
Edwards & Sons greatest accomplishments in the past was the fact that
on Black Thursday the single most largest lost was 5,000 dollars out
of more than one million dollars (Flagg, 1994, p. 56). This well
managed event proved that A.G. Edwards had what it took back then to
make it in the stock brokerage industry. Later down the line A.G.
Edwards & Sons formed a type of mother company entitled A.G. Edwards
Inc. which now oversees many other businesses. To this day the company
still displays these similar types of skills and that is why the
industry has continued to excel.
Despite the fact that most people haven?t heard of A.G.
Edwards Inc., it is actually quite a large company. The corporation is
described as a “holding company (Compact Disclosure, 1996,p. 1 (CD,
1996, p.1)).” The corporation contains many subsidiaries which are the
following: A.G. Edwards & Sons, Inc., Ceres Investment Co.,
Indianapolis Historic Partners, AGE Commodity Clearing Corp., A.G.
Edwards Life Insurance Co., Edwards Development Corp., A.G. Edwards
Trust Co., A.G. Edwards Asset Performance Monitor, Inc., A.G.E.
Properties, Inc., A.G.E. Reality Corp., A.G.E. Redevelopment Corp.,
Gull-Age Capital Group, Inc., AGE Investments, Inc. (CD, 1996 , p.
12). All of these subsidiaries perform the following tasks: provide
security and commodity brokerage services for individual, corporate
and institutional clients; distribute mutual funds, handle corporate
and municipal unit trusts, tax incentive investments, life insurance
and annuities; provide investment banking services for corporate,
governmental and municipal clients; and operate as a futures
commission merchant (CD, 1996, p.1). As you can see A.G. Ed-wards Inc.
is indeed a big company and has tremendous assets. Since A.G. Edwards
& Sons is the principle subsidiary, when discussing the functions of
the corporation the func-tions of A.G. Edwards & Sons will mainly be
discussed.
A.G. Edwards Inc. is the full name of the corporation and is
based out of St. Louis Missouri. The primary office of the corporation
is One North Jefferson Avenue, St. Louis MO, 63103-2205. The primary
SIC Code is 6211 Security Brokers and Dealers. The other two SIC Codes
are: 6411 Insurance Agents, Brokers, and Service; and 6719 Hold-ing
Companies, nec (CD, 1996, p. 1). A.G. Edwards Inc. currently contains
11,279 employees. Since A.G. Edwards Inc. is a corporation it does
contain numerous officers the following is a list of the main
officers:
—
Name Age Title Salary
Edwards, Benjamin F. ,III 64 Chairman of the Board, President, Chief
Executive Officer, Subsidiary Officer $1,512,627
King, Eugene J. 64 Vice President, Subsidiary Officer NA
Proost, Robert L. 58 Vice President, Subsidiary Officer NA
Avis, Robert 64 Vice Chairman of the board, Subsidiary Oficer
$1,174,034
Dissett, Robert C. 58 Subsidiary Officer $893,849
Mesker, David W. 64 Treasure, Subsidiary Officer NA
Ewdards, Mary G. 53 Treasure NA
Sisler, David M. 60 Vice President NA
—
In the subsequent paragraphs the organization of the company will be
discussed. From reading over all of the sources that have been
compiled for this paper it is relevant to me that A.G. Edwards Inc. is
a good solid company that treats its customers well and contains
employees who are on top of things. One of the biggest problems that
brokerage firms are facing is the complexity and strict rules and
regulations that are now being pressed upon the firms (1996 Annual
Report, 1996, p. 5 (1996 Report, 1996, p. 5)). Since this is occurring
in the industry of securities it is very important for A.G. Edwards to
stay on top of everything in order to keep up with the competition and
stay in business. The following is a quote from A.G. Edwards? annual
report: To remain flexible, offer the services investors need and
deliver value for what is charged. A.G. Edwards is prepared to meet
these challenges. We are confident our service-oriented philosophy,
along with our ongoing efforts to provide our in-vestment brokers the
latest technology and support resources, will position us well as we
look toward the next century (1996 Report, 1996, p. 5). From this
statement A.G. Edwards declares that they are very prepared for
whatever is ahead of them in the future and will make the sacrifices
to stay in business and continue to have content stock holders,
employees and clients. Benjamin Edwards III, the CEO of the
corporation states numerous times that the number one interest of the
corporation is to look out for the customer and always be placing them
first.
The Organization of A.G. Edwards Inc. is organized like most
other corporations. The organization of A.G. Edwards Inc. can be
considered centralized. As it can be seen from the preceding chart the
organization is hierarchical. There is Banjamin Edwards who is the
president and resides over all the other positions in the corporation.
The other posi-tions include subsidiary officer, treasure, vice
chairman of the board, vice president, sec-retary, and controller
assistant secretary. Under the people in these positions is the board
of directors and then the stock holders. The interesting aspect about
A.G. Edwards Inc. is since A.G. Edwards Inc. is composed of numerous
small corporations each subsidiary has its own board of directors.
Integration in a business sense has been described to me as in the
vertical and hori-zontal senses; vertical integration being defined as
containing a general sense of one or more industries or being a full
service corporation. So basically a corporation that sup-plies
numerous services under one roof would be considered vertically
integrated. With this in mind A.G. Edwards Inc. is definitely a
vertically integrated company. A.G. Ed-wards Inc. is certainly a
generalized company since is contains so many subsidiaries.
Since A.G. Edwards Inc. oversees many other smaller companies,
it also competes in numerous other markets. These markets are the
markets for: stock, futures and com-modity brokerage, life insurance
and annuities, mutual funds, corporate and municipal trusts, and
investment banking. This is the section of the paper where the
financial aspects of the company are dis-cussed. A chart will mostly
be used in order to express the companies standing and then the chart
will be explained as to what the figures for the company signify. The
following chat gives a good general outlook as to what is numerically
happening financially to the company.
—
Operating Results 1996 1995 1994 1993 1992
Revenues $1,454,467 $1,178,342 $1,278,641 $1,074,388 $938,659
Net Earnings $170,582 $124,119 $154,871 $119,425 $105,532
Net Earnings as a Percent of Revenues 11.7% 10.5% 12.1% 11.1% 11.2%
Earnings Per Share $2.65 $2.00 $2.57 $2.07 $1.88
Stockholders? Equity $1,088,684 $919,281 $790,367 $615,240 $492,010
Return on Average Equity 17.0% 14.5% 22.0% 21.6% 24.0%
Total Assets $3,102,085 $2,224,282 $2,236,590 $2,111,192 $1,577,143
—
From this chart many conclusions can be drawn. Before what the actual
numbers signify, the terms in the chart will be explained. Revenue is
the total gross amount of money that the corporation brought in for
that year. Net Earnings is the net income or the monetary value that
the corporation brought in that year after expenses. The earnings per
share is how much net earnings the corporation made for every share of
the company. Earnings per share is more or less the earnings divided
by the number of shares that have been issued by the corporation. The
stockholders equity is basically what return the public has gotten for
investing in the company. Then the total assets is the monetary value
of the company and everything that is connected to it. There is also
the statistics of the shares of A.G. Edwards Inc. The return on
average equity is the return on the money that is in-vested
internally. The current outstanding shares are 63,430,245. From that
number the number of shares held by insiders is 2,238,256 and the
number of shareholders is 21,500. On January 31, 1997 the high for the
price of the stock was 34.625 and the low was 33.125 and then closing
at 34.000 (CD, 1996, p. 8). The stock price for March 4, 1997 was a
high for the day at 36 and a low for the day at 35 3/8 and then closed
at 35 3/8 which is the unchanged price from the previous day (America
Online, 1996). The earning per share for that day was 3.21 (America
Online, 1996). Based on what has been presented in the preceding
paragraphs I think that A.G. Edwards would be a good investment. From
what I have read in the all of the materials that have been at my
disposal, A.G. Edwards Inc. made a very good impression on me. They
seem to be a corporation that is on a right track and once it can
break away from the competition it will be huge. I also think that it
is very possible for A.G. Edwards to be-come a great company if it
continues with the upward trend in earnings that it has been
displaying for the past decade. From the chart I can draw these
conclusions just by look-ing at the net earnings and how they have
increased almost 70 thousand dollars. This shows that the company has
been doing something right and thus could potentially be a good
investment.
A.G. Edwards Inc. has done very well in the industry this year
making it a record year for 1996, although much of the credit was
because of the big jump in the Dow Jones average (1996 Report. 1996,
p. 3). A.G. Edwards Inc.?s net earnings reached an all time high and
resulted in the paying of more that 100 million dollars in current
year income taxes for the first time (1996 Report, 1996, p. 3).
Related to the jump in net earnings was the fact that the
stockholder?s net worth went to 1.1 billion dollars, or 17 dollars per
share (1996 Report, p. 3). A.G. Edwards Inc. has undoubtedly
experienced a great year weather or not they can be credited with
their success. Because of the increase in earnings that A.G. Edwards
has experienced the corporation was able to expand their office
locations (1996 Report, 1996, p. 3). In the fourth fiscal quarter A.G.
Edwards Inc. opened offices in Harrisburg, PA; Galesburg, Ill;
Griffin, GA; granting A.G. Edwards a total of 536 locations (1996
Re-port, 1996, p. 3). Including these office locations, there were
twenty more other office locations added around the United States for
the year of 1996 (1996 Report, 1996, p. 23). A.G. Edwards was also
able to increase its number of investment brokers to 5,757 by the end
of the year, an increase of 5% from the prior year (1996 Report,
1996, p. 23). Also in the past twenty years A.G. Edwards has grown to
483 offices in 48 states (Siconolfi, 1993, p. 23). The broker sales
force more than doubled since the year of 1984 (Siconolfi, 1993, p.
24). These are great changes for the corporation and shows investors
that the company has a sure footing in the industry. There has also
been the past changes in the corporation with the continuous adding of
smaller subsidiary corporations which all per-form separate tasks
under the name of A.G. Edwards Inc.
From this paper the reader should have learned a great deal
about A.G. Edwards Inc. A.G. Edwards Inc. is an interesting
corporation because of numerous reasons. Probably the number one
reason for this is the fact that its main subsidiary is a brokerage
firm and brokerage firms are fast paced people working together with
other people. When you have this combination the future can never be
predicted with great accuracy. The corporation is so big considering
that it contains so many other companies, and any corpo-ration with
numerous other corporations underneath it is always fun to learn
about. From this paper it is my hope that the reader has become more
knowledgeable about the corporation A.G. Edwards. Not only how much
money the corporation has pulled in or what it does, but also about
how it is run and what the attitude of the company is.
—
References
Anthony, Van “Securities Firms” 1993, September) The Securities and
Exchange Com-mission Report. Hoover?s Company & Industry Database.
CD-ROM. September 1993.
A.G. Edwards Inc. (1996, February 29). 1996 Annual Report
Siconolfi, Michael. (1993 December). “Rating The Brokers” Smart Money,
23-26.
“Complete Company Records” (1996, February) Compact Disclosure.
CD-ROM. February 1996.
“Quotes and Portfolios.” (1997 March 5). America Online. Online.
America Online. Keyword: Quotes.
Flagg, Jonas. (1994 August/September) “A.G. Edwards: A 107-Year-Old
Legacy” Securities Industry Management Magazine, 56.
—
Other References
1). I made the graph myself from data in: “Complete Company Records”
(1996, February) Compact Disclosure. CD-ROM. February 1996.
2). I made the graph myself from data in: A.G. Edwards Inc. (1996,
February 29). 1996 Annual Report