| FIN534: Financial Management
Name: Sara Pilgrim
Professor Name: Professor Dr. Ingrid Nelson
Date: 10/18/2024 |
| Company Analysis |
| U.S. Stock exchange: Company Name: |
| Company 1: Amazon (AMZN) : |
Company 2 : Apple (AAPL): |
| Determine the free cash flow for the last two most recent years for the two companies. |
| 1.Free Cash Flow (2023) = $84.946 billion - $52.729 billion = $32.217 billion
2.Free Cash Flow (2022) = $46.752 billion - $63.645 billion = -16.893 billion (negative FCF) |
Free Cash Flow (2023) = $110,543 - $10,959 = $99,584 million
Free Cash Flow (2022) = $122,151 - $10,708 = $111,443 million |
| Explain how a company’s free cash flow (cash flow from operating activities minus capital expenditures) impacts its growth potential. |
| Since it shows the cash left over after capital and operational expenses are deducted, free cash flow (FCF) is a crucial indicator of a company's financial health. This leftover money can be put to a lot of different uses and is a key factor in assessing a company's potential for expansion. |
The ability of a business to grow is largely dependent on its free cash flow (FCF), which offers the capital required for expansion, innovation, and investments in new goods without the need for outside funding. Strong financial cash flow (FCF) allows a business to take advantage of opportunities, weather setbacks, and pay off debt. |
| Instructions: Find the numbers for these calculations from the income statement or balance sheet for each company from the annual report or 10-K. Make sure the numbers are not from the 10-Q or quarterly report as you want to make apples to apples comparisons. |
| Your Name: |
Sara Pilgrim |
| Industry: |
Technology and e-commerce |
| Company 1 Name: |
Amazon.com, Inc |
| Company 2 Name: |
Apple Inc., |
| Company 3 Name: |
Microsoft Corporation (MSFT). |
| Income Statement Information |
| Total Revenue |
| Company 1 Name: Amazon.com, Inc |
$574.78 billion |
| Company 2 Name: Apple Inc., |
$383.29 billion |
| Company 3 Name: Microsoft Corporation (MSFT) |
$212.03 billion |
| Gross Profit |
| Company 1 Name:Amazon.com, Inc. (AMZN |
$93.805 billion |
| Company 2 Name:Apple Inc. (AAPL) |
$169.148 billion |
| Company 3 Name:Microsoft Corporation (MSFT) |
$149.35 billion |
| Net Income |
| Company 1 Name:Amazon.com, Inc. (AMZN |
$30.425 billion |
Note: Choose Net Income or EBITDA. Generally accepted accounting principles (GAAP) only requires the use of Net Income and EBITDA is optional. Foreign companies generally do not follow GAAP and use EBITDA because it normally makes the numbers look better. |
| Company 2 Name:Apple Inc. (AAPL) |
$96.995 billion |
| Company 3 Name:Microsoft Corporation (MSFT |
$72.36 billion |
| EBITDA |
| Company 1 Name:Amazon.com, Inc. (AMZN |
$21.62 billion |
| Company 2 Name:Apple Inc. (AAPL) |
$113.74 billion |
| Company 3 Name:Microsoft Corporation (MSFT |
$89.93 billion |
| Balance Sheet Information |
| Total Assets |
| Company 1 Name:Amazon.com, Inc. (AMZN |
$527.854 billion |
| Company 2 Name:Apple Inc. (AAPL) |
$352.583 billion |
| Company 3 Name:Microsoft Corporation (MSFT |
$411.98 billion |
| Total Liabilities |
| Company 1 Name:Amazon.com, Inc. (AMZN |
$325.979 billion |
| Company 2 Name:Apple Inc. (AAPL) |
$290.437 billion |
| Company 3 Name:Microsoft Corporation (MSFT |
$205.75 billion |
| Total Stockholders' Equity |
| Company 1 Name:Amazon.com, Inc. (AMZN |
$201.875 billion |
| Company 2 Name:Apple Inc. (AAPL) |
$62.146 billion |
| Company 3 Name:Microsoft Corporation (MSFT |
$206.22 billion |
| Ratios Calculations |
| Calculate the Following Ratios: |
| Debt to Equity Ratio Formula (Total Debt/Total Equity) |
Total Debt |
Total Equity |
Debt to Equity Ratio |
| Company 1 Name:Amazon.com, Inc. (AMZN |
$325.979 billion |
$201.875 billion |
1.61 |
| Company 2 Name:Apple Inc. (AAPL) |
$111.088 billion |
$62.146 billion |
1.79 |
| Company 3 Name:Microsoft Corporation (MSFT |
$47.24 billion |
$206.22 billion |
0.23 |
| Gross Margin Formula (Gross Profits/Sales) |
Gross Profits |
Sales |
Gross Margin |
| Company 1 Name:Amazon.com, Inc. (AMZN |
93.805 billion |
$574.78 billion |
16.32% |
| Company 2 Name:Apple Inc. (AAPL |
$169.148 billion |
$383.29 billion |
44.13% |
| Company 3 Name:Microsoft Corporation (MSFT |
$149.35 billion |
$212.03 billion |
70.44% |
| Operating Margin Formula (Operating Income/Sales) |
Operating Income |
Sales |
Operating Margin |
| Company 1 Name:Amazon.com, Inc. (AMZN |
$36.852 billion |
$574.78 billion |
$49.47 |
| Company 2 Name:Apple Inc. (AAPL): |
$114.301 billion |
$383.29billion |
29.82% |
| Company 3 Name:Microsoft Corporation (MSFT |
$83.59 billion |
$212.03 billion |
39.42% |
| Find the appropriate amounts from the 10K annual report and insert them into the formula to calculate. |
| Formulas |
Company A |
Company B |
Company C |
| Profitability ratios: |
Amazon.com, Inc. (AMZN |
Apple Inc. (AAPL |
Microsoft Corporation (MSFT |
| Profit margin = Net Income/Sales |
5.29% |
25.30% |
34.13% |
| Current ratio = Current Assets/Current Liabilities |
105.00% |
99.00% |
177.00% |
| Efficiency ratios: |
| Inventory turnover = Cost of Goods Sold/Average Inventory |
14.2 |
37.97 |
20.09 |
| Accounts receivable turnover = Net Sales/Average Accounts Receivable |
12.15 |
13.29 |
4.56 |
| Leverage ratios: |
| Debt to equity ratio = Total Liabilities/Shareholders' Equity |
1.61 |
4.67 |
0.998 |
| Debt/Assets = Total Liabilities/Total Assets |
0.617:1 |
0.82 |
4:48 |
| Liquidity ratios: |
| Current ratio = Current Assets/Current Liabilities |
1.05 |
0.99 |
1.77 |
| Quick ratio = (Current Assets - Inventory)/Current Liabilities |
0.843 |
0.94 |
1.75 |
| Discuss three takeaways or an analysis of what you’ve learned about each company based on their financial data. Include at least one paragraph for each company. |
| Analysis |
| Company 1 Name:Amazon.com, Inc. (AMZN |
Amazon's financial statistics for 2023 shows that despite $574.78 billion in revenue and $93.805 billion in gross profit, the corporation is still a global leader. Driven by its broad business operations, which include e-commerce and Amazon Web Services (AWS), Amazon maintains a healthy profit margin of 5.29% despite operating in a capital-intensive market. With $32.217 billion in free cash flow, the corporation demonstrates its capacity to produce large sums of money, which enable it to fund development and reinvestment plans. But with a quick ratio of 0.843 and a debt-to-assets ratio of 0.617, Amazon is somewhat dependent on debt and might run into problems with liquidity when inventory is taken out. In general, Amazon has strong finances and strikes a balance between expansion initiatives and operational effectiveness, setting it up for long-term success. |
| Company 2 Name:Apple Inc. (AAPL) |
Apple Inc.'s 2023 financial results show good operational efficiency and profitability. With $383.29 billion in revenue and a $169.148 billion profit, Apple was able to retain a strong 44.13% gross margin. The business's high earnings generation and efficient cost control are demonstrated by its operating margin of 29.82% and profit margin of 25.30%. Apple's high debt to equity ratio of 4.67 implies significant leverage, even while its current ratio of 0.99 and quick ratio of 0.94 demonstrate near-parity between current assets and liabilities. However, Apple's effective operations—which include a turnover of accounts receivable of 13.29 and inventory of 37.97—indicate that the business is well-positioned for future expansion and stability. |
| Company 3 Name:Microsoft Corporation (MSFT |
With total sales rising from $212.03 billion in 2023 to $245.12 billion in 2024—a 15.6% growth rate—and a gross margin of 69.77%, Microsoft has shown to be a financially strong company. The operating margin increased to 44.64% as the operating income increased from $83.59 billion to $109.43 billion, demonstrating efficient cost control and operational effectiveness. Both the current and quick ratios are still above the acceptable standard, indicating that Microsoft can still satisfy its obligations, even though they have reduced, signaling a larger reliance on inventory for short-term liabilities. Additionally, there was an improvement in the debt-to-equity ratio, which went from 0.998 to 0.908, indicating a healthier balance sheet and less dependence on debt. All things considered, Microsoft's strong financial standing sets it up for future expansion and market flexibility. |
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FIN534_Company_Stock_Analysis_Template.xlsx
