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
The two largest stock exchange in the United States are the New York Stock Exchange and the National Association for Stock Dealers Automated (NASDAQ). The two stock exchanges deal with large numbers of exchanges. Both deal with great numbers of stock exchanges daily. NASDAQ was founded in1971 while NYSE was founded in 1792. While NYSE deals with brokers who buy and sell for companies and clients in the exchange floor NYSE. (2019), NASDAQ operates with dealers via phone and over the internet. Initially, NASDAQ featured over the counter security, unlike today where it lists all types of stocks. The listed stocks meet the exchange criteria of NASDAQ, but NASDAQ lists technology firms (NASDAQ, 2019). NYSE is the most powerful and largest stock exchange in the word despite NASDAQ having more companies listed NASDAQ (2019). However, the market capitalization of NYSE is larger than the combination of NASDAQ, Tokyo, and London for this case; the selected stocks are NIKE (NKE) traded by NASDAQ and ADVANCE AUTO PARTS INC (AAP) traded by NYSE.
Using the two stocks you identified, determine the free cash flow from 2015 & 2016. What inference can you draw from the companies’ free cash flow?
Nike recorded a free cash flow of $3.720B in 2015 and $2.266B in 2016 (NASDAQ, 2019). In the case of Advance Auto Parts, it marked a free cash flow of $467.90M in 2015 and $263.74M in 2016 NYSE. (2019). Nike is a large company when it comes to cash flow; however, they experience a decrease in free cash flow year after year. Although Advance Auto Parts is a smaller company, it records a positive free cash flow yearly.
Using the information and formulas from your textbook, please prepare two financial ratios for each stock, using the 2015 & 2016 financial statements, to include: 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.
According to the information sourced in the exercise, there is somehow a positive result for all the ratios calculated for liquidity, probability ratio, and Asset Turnover. What causes the difference, in this case, is the line of business or market and the size of the two selected stocks.
Below are my calculations for all the ratios according to the information from respective financial statements and the text book:
The following are the different calculations based on each of the Ratios:
| Liquidity Ratio Calculation | ||
| Nike | 2015 | 2016 |
| Current assets | $15,587,000 | $15,025,000 |
| Current liabilities | $8,890,000 | $9,121,000 |
| Current Ratio | 1.75 | 1.65 |
| Liquidity Ratio Calculation | ||
| Advance Auto | 2015 | 2016 |
| Current assets | $4,940,000,000 | $5,170,000,000 |
| Current liabilities | $3,800,000,000 | $3,680,000,000 |
| Current Ratio | 1.3 | 1.4 |
| Total Assets Turnover Ration Calculation | ||
| 2015 | 2016 | |
| Nike Sales | $30,601,000 | $32,376,000 |
| Nike Assets | $21,597,000 | $21,379,000 |
| Ratio | 42% | 51% |
| Total Assets Turnover Ration Calculation | ||
| 2015 | 2016 | |
| Advance Sales | $9,734,000,000 | $9,568,000,000 |
| Advance Assets | $8,130,000,000 | $8,320,000,000 |
| Ratio | 19% | 15% |
| Profitability Calculation | ||
| 2015 | 2016 | |
| Nike Net Income | $3,273,000 | $3,760,000 |
| Nike Sales | $30,601,000 | $32,376,000 |
| Nike Ratio | 10.70% | 11.60% |
| Profitability Calculation | ||
| 2015 | 2016 | |
| Advance Net Income | $473,400,000 | $460,000,000 |
| Advance Sales | $9,734,000,000 | $9,568,000,000 |
| Advance Ratio | 4.90% | 4.80% |
References
Alexander Zorn, Michele Esteves, Ivo Baur, & Markus Lips. (January 01, 2018). Financial Ratios as Indicators of Economic Sustainability: A Quantitative Analysis for Swiss Dairy Farms. Sustainability, 10, 8.)
NASDAQ (2019). Retrieved from https://www.nasdaq.com/symbol/nke/financials?query=balance-sheetNYSE (2019). Retrieved from https://www.nyse.com/events/list/2019-07-05
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