Financial Management

A. In the 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 stock exchanges in US identified are NASDAQ & NYSE. Investigating a bit through the network, I have noticed the large division in the US stock market. We have on the one hand the NYSE (New York Stock Exchange) and on the other the Nasdaq.

The first is the largest stock market in the world, and the one with the largest number of listed companies with an international character. The second, of national character, has a greater number of shares than the first, but represents the fifth part of capitalization. So, I wonder, what division of the stock market in this way. I believe that this division is given by the differences between the markets in which the component companies of each group operate.

Therefore, those that act in the technological market, integrated in the Nasdaq, have a greater fluctuation of capitals in terms of transfer of shares. In contrast, in the NYSE, assets tend to act more leveraged, but with greater volume. Represented each of the stock markets different movements, and different requirements for its optimal functioning, and hence, in my opinion, the division of them.

B. Using the two stocks you identified, determine the free cash flow from 2013 & 2014. What inference can you draw from the companies’ free cash flow?

In Free Cash Flow (FCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers. Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly from the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at the own risk.

The FCFs have increased for Apple Inc. and decreased for Walmart Inc.

C. Using the most recent financial statements for both stocks, prepare two 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.

Ratio analysis is as follows, the strengths are that the firm has good financial position, whereas the firm is weak in the amount of cash available, and, challenges is that the firm should improve the level of debt earning position.

WALMART
Ratios	Formula	Year
		2014	2013
Liquidity Ratios:
1. Current Ratio	Current Assets / Current liabilities	0.86	0.97
2. Quick ratio	(Current Assets -Inventories )/ Current liabilities	22%	28%
3 .Cash Ratio	(Cash & Cash equivalents)/ Current liabilities	10%	14%
Management Ratios:
1. Debt Ratio	Total Debt / Total Assets	61%	60%
2. Debt-to-Equity Ratio	Total Debt / Total Equity	1.56	1.50
Profitability ratios:
1 . Gross Margin	Gross Margin / Net sales	25.6%	25.1%
2 .Operating Margin	Operating Margin / Net Sales	4.7%	5.0%
3 . Profit Margin	Profit Margin / Net Sales	2.8%	3.0%

APPLE
Ratios	Formula	Year
		2014	2013
Liquidity Ratios:
1. Current Ratio	Current Assets / Current liabilities	1.28	1.35
2. Quick ratio	(Current Assets -Inventories )/ Current liabilities	1.23	1.33
3 .Cash Ratio	(Cash & Cash equivalents)/ Current liabilities	8.41%	10.59%
Management Ratios:
1. Debt Ratio	Total Debt / Total Assets	64.28%	60.13%
2. Debt-to-Equity Ratio	Total Debt / Total Equity	1.80	1.51
Profitability ratios:
1 . Gross Margin	Gross Margin / Net sales	38.47%	39.08%
2 .Operating Margin	Operating Margin / Net Sales	26.76%	27.84%
3 . Profit Margin	Profit Margin / Net Sales	21.09%	21.19%