Question

Directions: Answer the following questions on a separate document. Explain how you reached the answer, or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above.

A. In your own words, please identify two different stock exchanges in the United States. Describe the similarities and differences between the two stock exchanges. Identify one stock from each of the two stock exchanges.

B. Using the two stocks you identified, determine the free cash flow from 2013 & 2014. What inference can you draw from the companies’ free cash flow?

C. Using the 2016 & 2017 financial statements for both stocks, prepare two financial ratios for each of the following categories: liquidity ratios, asset management ratios, and profitability ratios. You should have a total of six ratios for each stock, per year. What challenges, strengths, or weaknesses do you see? Please be articulate.

Answer 1

(A) Two exchanges in the United states : NYSE and NASDAQ.

Similarities:

• Both of the exchanges are equity market exchange and help price discovery.
• Most of the large companies are listed on both of the exchanges.
• Both are established in New York.

Basis	NYSE	NASDAQ
Year of Establishment	Established in 1817	Established in 1971
Type of market	It is a auction market	It's a dealer's market
Listing requirements	It has higher listing requirements	Lesser listing requirements
No. of companies listed	More no. of companies	Less no. of companies

(B)

	NASDAQ	NYSE
	Amazon	GE
Net Income	-241,000	15,233,000
Operating Activities, Cash Flows Provided By or Used In
Depreciation	4,187,000	6,423,000
Adjustments To Net Income	1,363,000	8,788,000
Changes In Accounts Receivables	-1,039,000	-1,913,000
Changes In Liabilities	2,500,000	50,000
Changes In Inventories	-1,193,000	-872,000
Changes In Other Operating Activities	706,000	-
Total Cash Flow From Operating Activities	6,842,000	27,709,000
Capital Expenditures	-4,893,000	-7,134,000
Free Cash flows	1,949,000	20,575,000
Inferences drawn from the free cash flows of both the companies
Amazon has more capital expenditure in relation to its operating cash flows thereby resulting into lesser free cash flows. Whereas, the GE has higher operating cash flows in relation to its capital expenditures. Both the companies don't have any interest expense and hence the tax effect is also ignored in this case.

(C)

	GE			Amazon
	2017	2016	Inferences	2017	2016	Inferences
Liquidity
Current Ratio	1.924224064	1.867943835	Improving current ratio is a good sign	1.039977195	1.044846631	Declining current ratio is a bad sign
Quick ratio	1.570015995	1.55025297	Improving Quick ratio is a good sign	0.762745538	0.783275516	Declining current ratio is a bad sign
Asset management ratio
Debt to assets	0.287277249	0.287746144	Declining debts to assets is a good sign	0.188431955	0.092251984	Increasing debt to assets is a bad sign
Net Sales to Assets Ratio	0.320819167	0.329349942	Declining net sales to assets ratio is a bad sign	1.354550301	1.630500468	Declining net sales to assets ratio is a bad sign
Profitability ratio
Gross Profit Ratio	0.122670142	0.213306395	Decling ratio is a bad sign	0.370683548	0.350930604	Improving ratio is a good sign
Net Profit Ratio	-0.047718801	0.073424626	Decling ratio is a bad sign	0.017052163	0.01743549	Declining ratio is a bad sign