Finance
EitnCajhav
ACC564_Wk2_HW_Q23_answerSheet.docx|
You will need: GE and Amazon,com2013 & 2014 annual reports to answer question #2 – the tax rates for each company can be found in their annual reports |
Q2. Using the two (2) stocks identified, General Electric and Amazon.com determine the Free Cash Flow from 2013 & 2014.
Free Cash Flow Formula
Net Income + Depreciation + Amortization + Non-cash Income - Net Working Capital
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Amounts |
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NYSE- General Electric - GE |
2013 |
2014 |
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Sales |
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- Cost of Goods Sold |
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- General Expenses |
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+ Depreciation and amortization |
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= EBIT* |
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- Interest expense |
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= EBT |
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x Tax rate (example 30%) then subtract |
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= Net Income |
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Add: Depreciation and amortization |
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Less: Changes in net working capital |
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Less: Capital expenditure |
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Free Capital |
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* EBIT = Earnings before interest and Taxes
Just transfer the answers from above and enter
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Free Cash Flows (FCF) |
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Stock |
2013 |
2014 |
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NYSE - General Electric |
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NASDAQ - Amazon.com |
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You will need GEs and Amazon.com two most recent annual reports, e.g., 2016 & 2017 to answer Q#3 |
Q3. Using the most recent financial statements for both stocks, prepare two (2) 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.
Liquidity ratio are Current & Quick ratios
Liquidity ratio - Current formula
Current assets ÷ current liabilities = current ratio
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Liquidity Ratio - Current |
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NYSE- General Electric - GE |
2016 |
2017 |
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Current assets |
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÷ Current Liabilities |
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Current ratio |
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Liquidity Ratio - Current |
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NASDAQ- Amazon.com- AMZN |
2016 |
2017 |
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Current assets |
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÷ Current Liabilities |
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Current ratio |
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Liquidity ratio - Quick formula
Current assets - inventories ÷ current liabilities = quick ratio
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Liquidity Ratio - Quick |
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NYSE- General Electric - GE |
2016 |
2017 |
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Current assets |
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- Inventories |
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÷ Current Liabilities |
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Quick ratio |
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Liquidity Ratio - Quick |
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NASDAQ- Amazon.com- AMZN |
2016 |
2017 |
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Current assets |
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- Inventories |
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÷ Current Liabilities |
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Quick ratio |
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Asset management ratios are: Total asset turnover, The fixed asset turnover, Accounts Receivable (Days Sales Outstanding) or (Average Collection Period) ratio and Inventory Turnover ratios.
Asset management ratios - Total asset turnover ratio formula
Sales ÷ Total sales = Total asset turnover ratio
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Asset management ratio - Total asset turnover |
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NYSE- General Electric - GE |
2016 |
2017 |
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Sales |
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÷ Total assets |
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Total asset turnover ratio |
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Asset management ratio - Total asset turnover |
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NASDAQ- Amazon.com- AMZN |
2016 |
2017 |
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Sales |
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÷ Total assets |
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Total asset turnover ratio |
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Asset management ratios - The fixed asset turnover ratio formula
Sales ÷ Net fixed assets = The fixed asset turnover ratio
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Asset management ratio - The fixed asset turnover |
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NYSE- General Electric - GE |
2016 |
2017 |
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Sales |
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÷ Net fixed assets |
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The fixed asset turnover ratio |
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Profitability ratio - The fixed asset turnover |
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NASDAQ- Amazon.com- AMZN |
2016 |
2017 |
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Sales |
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÷ Net fixed assets |
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The fixed asset turnover ratio |
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Profitability ratios are: Net - Operating and Gross profit margins ratios
Profitability ratio - Net profit margin ratio formula
Net income available to stockholders ÷ Sales = Net profit margin ratio
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Profitability ratio - Net profit margin |
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NYSE- General Electric - GE |
2016 |
2017 |
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Net Income available to Common Stockholders |
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÷ Sales |
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Net profit margin ratio |
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Profitability ratio - Net profit margin |
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NASDAQ- Amazon.com- AMZN |
2016 |
2017 |
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Net Income available to Common Stockholders |
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÷ Sales |
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Net profit margin ratio |
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Profitability ratio - Gross profit margin ratio formula
Sales - COGS + depreciation ÷ sales = Gross profit margin ratio
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Profitability ratio - Gross profit margin |
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NYSE- General Electric - GE |
2016 |
2017 |
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Sales |
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- COGS |
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+ Depreciation |
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÷ Sales |
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Gross profit margin ratio |
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Profitability ratio - Gross profit margin |
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NASDAQ- Amazon.com- AMZN |
2016 |
2017 |
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Sales |
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- COGS |
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+ Depreciation |
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÷ Sales |
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Gross profit margin ratio |
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* COGS = Cost of Goods Sold
