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

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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.

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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