United States Stock Exchange Market 2

UNITED STATES STOCK EXCHANGE MARKET 2 United States Stock Exchange Market

There are quite a lot of stock exchanges in United States but I am going to consider New York Stock Exchange and Nasdaq Stock Exchange. Similarities between the Two Stocks Both New York stock exchange and Nasdaq stock exchange makes use of traffic controllers. These traffic controllers in the two exchange stocks deal with tariff issues which ensure that the markets of each exchange works effectively. Both stock exchanges emphasizes on trading stock choices, exchange traded good as well as fixed incomes without forgetting cash entities. Finally, both the stock exchanges make up for the trade bulk which involves connecting with the entities in USA as well as European stock market (Zeng, Xie, Yan, Hu, & Mao, 2016).

Differences between the Two Stocks Firstly, the New York Stock Exchange enables people to carry out transactions between one another on the basis of an auction while the Nasdaq Stock Exchange operates on a dealer market basis where people usually trade through dealer and not directly with each other. Secondly, the Nasdaq stock exchange entry fee is much less as compared to that of New York Stock Exchange. For instance, the Nasdaq entry fee ranges from $50,000 to $75,000 while that of New York stock exchange goes up to $250,000. Thirdly, comparing the companies listed in each exchange, the New York stock exchange had more than 1,860 companies in 2014 with a capital market of $16.6 trillion while Nasdaq had a list of more than 2,900 companies but with a capital market of only $8.5 trillion.

Finally on the perceptions of the two exchanges, while Nasdaq perceives that despite high tech stocks being more potential to volatility, they are more growth oriented, New York stock exchange perceives that well established companies exchanges are more stable stocks (Mitchell, 2017). The Free Cash Flows of Gen Electric and Microsoft Companies Stocks Free cash flow refers to the cash that an organization generates via its activities the less the cost of expenditures on assets. In this case, I will determine the free cash flow for Gen Electric which is a stock at the New York Stock Exchange and Microsoft which is a stock at Nasdaq stock exchange for the years 2013 and 2014 from their respective cash flow statements (Easton, & Sommers, 2018).

For Gen Electric, the net operating cash flow was $27.71 billion and expenditure on assets was $7.13 billion, therefore its free cash flow for the year 2014 was $20.58 billion and in 2013 was $15.121 billion with a net cash operating flow of $ 28.579 billion, and expenditure on assets of $13.458 billion. Microsoft was, in 2013, its net operating cash flow was $28,833 million and assets expenditure was $4,257 million. The difference between the two gives free cash flow for 2013 as $24,576 million while in 2014, net operating cash flow was $32,231 million and expenditure on assets was $5,485 therefore the free cash flow for 2014 was, (32,231-5,485) = $26,746 (Lincy, & John, 2016).

Financial Ratios for Both Stocks Using the 2016 & 2017 Financial Statements Gen Electric Profitability ratios a) return on assets = Net income/ total assets = (8.18)/382.62 = (0.021) b) gross profit margin = [(sales –COGS)/Sales] = 41.92/118.24 = 0.35 Liquidity Ratios a) current ratio = current assets/current liabilities = 104.23/79.3 = 1.31 b) Cash ratio = [(cash + marketable securities)/current liabilities] = 218.8/79.3 =2.76 Asset management ratios a) Inventory turnover = COGS/Average inventory = 76.32/8.7 = 8.77 b) Accounts payables turnover = total purchases/ Average accounts payables = 118.24/15 = 7.88 Microsoft Ratios Profitability ratios c) return on assets = Net income/ total assets = 21204/241,086 = 0.088 d) gross profit margin = [(sales –COGS)/Sales] = 55689/89,950 = 0.62 Liquidity Ratios c) current ratio = current assets/current liabilities = 159,851/64,527 = 2.477 d) Cash ratio = [(cash + marketable securities)/current liabilities] = 210,000/64,527 = 3.25 Asset management ratios c) Inventory turnover = COGS/Average inventory = 34261/2181 = 15.7 d) Accounts payables turnover = total purchases/ Average accounts payables = 21204/7390 = 2.87 From the ratios, both companies are able to finance their short term obligations as indicated by the current ratio.

Also, both companies have managed their inventories by reducing the volumes. Finally Microsoft has a desirable gross profit margin that is above 0.50 but Gen Electric has got a weakness since it’s below the desirable value of 0.50. Microsoft has a weakness on the income generated from the assets since it’s very minimal. However Gen Electric has got a great challenge on the income generated from the assets since its generating negative amount from the assets use (Schrippe, & Ribeiro, 2019).

References

• Easton, M., & Sommers, Z. (2018). Financial Statement Analysis & Valuation. 5th Edition.
• Lincy, G. R. M., & John, C. J. (2016). A multiple fuzzy inference systems framework for daily stock trading with application to NASDAQ stock exchange. Expert Systems with Applications, 44(C), 13-21.
• Mitchell, B. (2017). The Depression Decade: From New Era Through New Deal. Routledge.
• Schrippe, P., & Ribeiro, J. L. D. (2019). Preponderant criteria for the definition of corporate sustainability based on Brazilian sustainable companies. Journal of Cleaner Production, 209, 10-19.
• Zeng, Z. J., Xie, C., Yan, X. G., Hu, J., & Mao, Z. (2016). Are stock market networks non-fractal? Evidence from New York Stock Exchange. Finance Research Letters, 17, 97-102.