FIN 534

Antoinette Scott

FIN 534

Dr. Inez Black

April 16, 2019

Stock exchanges

The NASQAD and New York Stock Exchange (NYSE) are the two commonly known United States stock exchanges. These two firms list firms that trade their stock the public market. The NYSE is found in the Wall Street where the majority of the global business touching on currencies are done. The NYSE was established in 1792. The NASDAQ on the other was founded in 1971 and was initially dealing with over the counter securities, but it has currently delved into listing different existing types of stock for United States companies as well as the global businesses.

The two companies have their unique customers. For instance, NASDAQ offers listing services to technology firms such as Novavax, Ftb, Amgen, and Starbuck. On the other hand, NYSE is the leading listing firm globally, and its market capitalization is still more significant than the combination of London, Tokyo, and NASDAQ (Diffen, 2017). The firm enjoys the extensive market due to its reputation in listing many firms for a long time. As compared to NASDAQ which lists technological giants’ firms, NYSE list oldest companies that have in existence for a long time, for instance, the Edison which was established in the early 20th century to provide lighting an electricity services to the citizens of the United States.

The international firms can also trade their securities with these two firms on adhering to listing standards enshrined on the Securities and Exchange Commission rule. Some of the companies that have qualified to be listed in these two firms are the international leading car manufacturers and also the technological firms such as the Alibaba. Firms are listed in the stock exchanges to attract possible investors (Diffen, 2017).

Examples of the companies for the two stocks are Keycorp Company and Amgen Inc. listed in NYSE and NASDAQ respectively. These are the companies selected for the next questions.

Question 2

Cash flows for both firms

The Free cash flow is calculated by deducting capital expenditure from cash flow from operations.

NYSE

Keycorp company Free Cash Flow: 2013

Free Cash Flow = Cash Flow from operations – Capital expenditure

The figures obtained from the annual report are:

Cash Flow from operations = $ 10, 444

Capital Expenditure = $ 6 597

Free Cash Flow = 10 444 – 6597 = 3, 847 044 (2014annualreport.Keycorp.com)

Keycorp company Free Cash Flow: 2014

Cash Flow from operations = $ 14, 507

Capital Expenditure = $ 7, 044

Free Cash Flow = 14, 507, 000– 6, 597, 000= 7, 044, 000 044 (2014annualreport.Keycorp.com)

The obtained cash flow after calculation indicates that the firm had more income generated from its operations which they spent on capital expenditure. Also, the amount of revenue the firm had was enough for business maintenance as well as for the expansion. The increased free cash flow indicates that the firm has a stable financial performance which has to enable the firm to concentrate on the enhancement of shareholders values (Folger, 2017).

NASDAQ

Amgen. The free cash flow of 2013

Free Cash Flow = Cash Flow from Operations – capital Expenditure

6,291, 000 – 16, 597,000 = 37,069,000 (2014investor.Amgen .com)

Amgen Inc. The free cash flow of 2013

Free Cash Flow = Cash Flow from Operations – capital Expenditure

59, 713, 000 -20,624,00 = 39, 089, 0000

Amgen Inc. had an increase in free cash flow from operations and also increased in capital expenditure. Therefore, the increase in cash flow indicated that the firm had adequate funds for maintenance and business expansion and the surplus for the enhancement of the shareholders’ value (Investopedia, 2017).

Question C

The calculation of financial ratios

Each of the ratios has specific functions and are used by the firm to assess its performance in various aspects.

Liquidity ratios

Keycorp’s Liquidity ratio indicates the firm’s ability to clear its debt. The increase in the current ratio shows that the firm reduced its deficit in 2017.

Amgen ’ s current ratio is a bit higher than Keycorp which shows that the firm can pay the loan in time. Thus the company does not experience any challenge in loan repayment. Also, the increase I current ratio shows that the firm has reduced its debt.

Asset Management ratio

b

The low percentage shows that the firm does not pay the debt on any external sources of finance. This small percentage indicates that the firm is independent.

Amgen Inc.

The high percentage indicates that the firm relies on external funds which include borrowings. Therefore, the firm is dependent on another form of funding.

Profitability ratios

The firm keeps the smallest amount of revenues after paying its stakeholders; therefore the company might experience challenges associated with the overall running of the business.

The firms generate strong cash flow as compared to Keycorp, but still, the amount is less and can impact negatively on the company’s operations.

Reference

Amgen (2017) Financial Information. Earnings Releases and 10-K Annual Reports 2014. Retrieved from: http://investor.Amgen .com/financials.cfm