Directions Explain How You Reached The Answer Or Show Your W

Directions Explain How You Reached The Answer Or Show Your Work If

Directions Explain How You Reached The Answer Or Show Your Work If

Explain how you reached the answer, or show your work if a mathematical calculation is needed, or both. 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.

Paper For Above instruction

The landscape of the stock exchanges in the United States is dynamic and pivotal to the functioning of financial markets. To understand this environment, it is essential to examine the major exchanges, their similarities and differences, and the financial health of selected companies listed therein. This essay will identify two prominent stock exchanges, analyze the free cash flow of selected stocks from each, and evaluate financial ratios to assess companies' liquidity, asset management, and profitability, providing insights into their operational strengths and weaknesses.

Identification and Comparison of Two U.S. Stock Exchanges

The two primary stock exchanges in the United States are the New York Stock Exchange (NYSE) and the NASDAQ Stock Market. The NYSE, often referred to as the "Big Board," is characterized by its physical trading floor located on Wall Street in New York City. It is the oldest and one of the largest stock exchanges globally, traditionally known for listing large-cap, established companies. Its trading mechanism involves a hybrid system of electronic and floor-based trading, emphasizing auction-based trading where designated market makers facilitate transactions.

In contrast, the NASDAQ (National Association of Securities Dealers Automated Quotations) operates exclusively electronically without a physical trading floor. It was founded in 1971 and is known for hosting technology and growth-oriented companies, such as Apple, Microsoft, and Amazon. The NASDAQ employs a dealer-based system, with multiple market makers quoting prices and executing trades electronically. While both exchanges list publicly traded companies, their target markets, trading mechanisms, and company profiles differ significantly.

Both exchanges serve vital roles in the U.S. financial system, providing a platform for capital raising and liquidity. The NYSE's strength lies in its long-standing reputation and stability, while the NASDAQ's strength is in its technological innovation and hosting of high-growth companies. The main difference lies in their trading methodologies, with the NYSE combining traditional floor trading and electronic systems, and the NASDAQ relying solely on electronic communication networks.

Selection of Stocks and Analysis of Free Cash Flow

For this analysis, two stocks are selected from each exchange: The Coca-Cola Company (NYSE) and Apple Inc. (NASDAQ). Coca-Cola as a mature consumer staples company contrasting with Apple's technology sector growth orientation provides valuable insights into different business models.

Calculating free cash flow (FCF) involves subtracting capital expenditures from operating cash flow. Based on publicly available financial statements, in 2013, Coca-Cola reported operating cash flows of approximately US$8 billion and capital expenditures of about US$1 billion, resulting in an FCF of roughly US$7 billion. In 2014, operating cash flows increased to around US$8.2 billion, and capital expenditures were about US$1.1 billion, yielding an FCF of approximately US$7.1 billion.

Similarly, Apple’s operating cash flows in 2013 were about US$45 billion with capital expenditures near US$3 billion, producing an FCF of approximately US$42 billion. In 2014, operating cash flow was approximately US$52 billion, with capital expenditures of US$8 billion, resulting in an FCF of around US$44 billion.

From these figures, it is evident that both companies generate significant free cash flows, indicating strong operational efficiency and financial health. Apple's substantially higher free cash flow signals its superior cash-generating capacity, consistent with its rapid growth and high profitability, compared to Coca-Cola’s steady but lower free cash flow, reflecting its mature business model.

Analysis of Financial Ratios: 2016 & 2017

Liquidity Ratios

Liquidity ratios such as the current ratio and quick ratio reveal the companies' short-term financial stability. In 2016, Coca-Cola's current ratio was around 1.0, indicating it had just enough assets to cover its short-term liabilities, reflecting a stable liquidity position. Apple’s current ratio in 2016 was approximately 1.4, suggesting a stronger liquidity cushion. In 2017, Coca-Cola's current ratio declined slightly to 0.9, signaling potential liquidity concerns, whereas Apple’s ratio increased marginally to 1.5, reinforcing its liquidity strength.

Asset Management Ratios

Asset management ratios like inventory turnover and receivables turnover indicate operational efficiency. Coca-Cola's inventory turnover hovered around 6 times per year in 2016 and 2017, implying efficient inventory management given the nature of its products. Apple’s receivables turnover ratio improved from approximately 8 times in 2016 to 9 times in 2017, reflecting better collection efficiency. These ratios highlight strengths in asset utilization but also indicate potential challenges if ratios decline or become irregular.

Profitability Ratios

Profitability ratios such as return on assets (ROA) and net profit margin reveal company profitability. Coca-Cola’s ROA was about 8% in 2016 and 8.5% in 2017, indicating stable earnings relative to assets. Apple’s ROA was significantly higher, at approximately 15% in 2016 and increasing to 16% in 2017, demonstrating superior profitability. The net profit margin for Coca-Cola remained around 20%, while Apple’s margin consistently exceeded 20%, further evidencing its strong profitability.

Challenges, Strengths, and Weaknesses

The analysis highlights several key considerations. Coca-Cola's stable free cash flow and consistent profitability signal a resilient business model, but its declining current ratio suggests potential liquidity challenges if short-term obligations increase significantly. Its efficient asset management reflects established operational excellence; however, it faces intense competition from healthier beverage options and evolving consumer preferences, which may threaten future growth.

Apple’s high free cash flow and robust profitability ratios exemplify its innovative capacity and market dominance. Its strong liquidity position provides flexibility for expansion and investment, yet this growth relies heavily on successful product development and global market strategies. Potential weaknesses include dependency on specific flagship products and exposure to supply chain risks.

Overall, both companies demonstrate financial stability and operational efficiency, although they operate in different contexts—Coca-Cola as a mature, dividend-paying company, and Apple as a high-growth tech innovator. Recognizing these differences is critical for investors assessing future prospects and risks.

Conclusion

Understanding the similarities and differences between major U.S. stock exchanges, analyzing selected companies’ free cash flows, and evaluating key financial ratios offer comprehensive insights into corporate health and market dynamics. While Coca-Cola exemplifies stability in a mature industry, Apple’s impressive cash flow and profitability underline the potential of innovative technology firms. These analyses are vital for informed investment decision-making and strategic planning.

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