HRM Financial Management Strayer Homework Set 3 Chapters 6 To 8 Homework Set #3: Chapters 6, 7, & 8 Due Week 6 and worth 100 points Directions: Answer the
HRM Financial Management Strayer Homework Set 3 Chapters 6 To 8 Homework Set #3: Chapters 6, 7, & 8 Due Week 6 and worth 100 points Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above. A. Using the two stocks you selected from Homework #1, identify the Beta for each stock. In your own words, what conclusion can you draw from the stocks’ current and historical beta? If the stock market went up 10% today, what would be the impact on each of your stocks? B. Using the 2014 financial statements from your stocks above and the equations from your textbook, prepare the Historical Average and Standard Deviation for each stock. Click here to view the grading rubric. By submitting this paper, you agree: (1) that you are submitting your paper to be used and stored as part of the SafeAssign™ services in accordance with the Blackboard Privacy Policy; (2) that your institution may use your paper in accordance with your institution’s policies; and (3) that your use of SafeAssign will be without recourse against Blackboard Inc. and its affiliates.NOTE:I HAVE ATTACHED HOMEWORK 1! 01/12/19! Homework Set #3: Chapters 6, 7, & 8
Due Week 6 and worth 100 points
Directions: Answer the following questions on a separate document. Explain how you reached the
answer or show your work if a mathematical calculation is needed, or both. Submit your assignment
using the assignment link above.
A. Using the two stocks you selected from Homework #1, identify the Beta for each stock. In your own
words, what conclusion can you draw from the stocks’ current and historical beta? If the stock market
went up 10% today, what would be the impact on each of your stocks?
B. Using the 2014 financial statements from your stocks above and the equations from your textbook,
prepare the Historical Average and Standard Deviation for each stock.
Click here to view the grading rubric.
By submitting this paper, you agree: (1) that you are submitting your paper to be used and stored as
part of the SafeAssign™ services in accordance with the Blackboard Privacy Policy; (2) that your
institution may use your paper in accordance with your institution’s policies; and (3) that your use of
SafeAssign will be without recourse against Blackboard Inc. and its affiliates.
Financial Management
Liliana Pinzon
Dr. Bassam Hamdan
Financial Management
January 12, 2019
A. 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.
According to the Trade Education website, the two major stock exchanges in the United
States are the New York Stock Exchange (NYSE) and the National Association of Securities
Dealer Automated Quotation (NASDAQ) (Trade Organization, n.d). NYSE is the largest
globally, going by its market capitalization. It has over 3000 listed companies trading on it like
Ford Motors, Coca Cola, and McDonald’s among others (Trade Organization, n.d). NASDAQ is
the second largest stock exchange also by market capitalization after NYSE. For NASDAQ,
stock trading is done electronically hence the exchange has got more volume compared to other
stock exchanges. Most of the companies that trade their stock on NASDAQ are technology
companies like Microsoft, Dell Intel among others (Trade Organization, n.d). This brings out the
perspective that the stocks on NASDAQ are highly volatile and growth-oriented in comparison
with those of the NYSE. NASDAQ basically operates through automated trade in comparison to
NYSE that uses specialized floor traders. Another difference is in the year they were launched.
NASDAQ was launched in February 1971 while NYSE was launched earlier in 1792. For the
similarities, both stock exchanges are public stock exchanges, and both have their location in
New York City. Also, they both conduct many stock exchanges daily given they are among the
leading exchanges globally. An example of stock from NYSE is General Electric (GE) and that
from NASDAQ is Intel Corporation (INTC).
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?
Free cash flow (FCF) is obtained by subtracting the company’s capital expenditures from
its cash flow from operations. Intel’s free cash flow in 2013 and 2014 was $10.07 Billion and
$10.31 Billion respectively. On the other hand, General Electric’s free cash flow in 2013 and
2014 was $15.12 Billion and $20.58 Billion respectively. Intel’s FCF was more of a constant
while that of GE recorded a significant increase.
General Electric: From the FCF values, it can be inferred that GE has more cash inflows
from its operations which means the company was well able to pay its dividends and interest on
loans. This meant that the company could comfortably borrow and generate more cash for capital
expenditures hence company expansion.
Intel Corporation: This Company recorded a slight increase in its FCF from 2013 to
2014. This is an indicator that the company also had positive cash flows like a decrease in
accounts payables, receivables, and increased inventory outflow.
C. Using the 2016 & 2017 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.
General Electric
Liquidity Ratios
Asset Management Ratios
Current Ratio (Current
Assets/Current Liabilities)
Quick Ratio (Current Assets
– Inventories) / Current
Liabilities
Debt Ratio (Total Debt/Total
Assets)
2016
1.92
2017
1.86
1.64
1.58
4.82
5.88
Debt to Equity Ratio (Total
1.39
1.71
Debt/Total common Equity)
Profitability Ratios
Operating Profit Margin
10.91
4.24
(EBIT/Sales)
Gross Profit Margin (Sales23.74
21.08
Cost of Goods sold)/Sales
The liquidity ratios slightly decreased from 2016 to 2017 which means GE increased
their borrowing or rather debts/liabilities. The ratios are still positive and an indicator of good
financial health and ability to pay off their short- and long-term debts comfortably. For the two
asset management ratios, they increased from 2016 to 2017, an indicator of increased
dependence on debt. The company ought to increase its earnings to reduce their dependence on
debt during the next financial year. Lastly, the two profitability ratios show a decrease more so in
the operating profit. As such, GE’s ability to create value for their shareholders through the
operating cash flow generated significantly decreased. It generally means GE’s efficiency
reduced hence the need for the implementation of aggressive marketing strategies to increase
sales in 2018.
Intel Corporation
Liquidity Ratios
Asset Management Ratios
Profitability Ratios
Current Ratio (Current
Assets/Current Liabilities)
Quick Ratio (Current Assets
– Inventories) / Current
Liabilities
Debt Ratio (Total Debt/Total
Assets)
Debt to Equity Ratio (Total
Debt/Total common Equity)
Operating Profit Margin
(EBIT/Sales)
Gross Profit Margin (SalesCost of Goods sold)/Sales
2016
1.75
2017
1.69
1.07
1.13
1.71
1.79
0.33
0.38
24.85
29.19
60.94
62.25
The Current ratio slightly decreased from 2016 to 2017 which means INTC increased
their borrowing. The quick ratio, however, showed an increase to signify the company’s ability
to meet its short-term debts. For the two asset management ratios, they slightly increased from
2016 to 2017, an indicator of a slight increase in dependence on debt. The company ought to
increase its earnings to reduce their dependence on debt during the next financial year. Lastly,
the two profitability ratios show an increase from 2016 to 2017. This means INTC recorded an
increased efficiency which is a trend that is to be encouraged in the coming financial years.
References
GE Annual Financials Retrieved from
https://www.marketwatch.com/investing/stock/ge/financials/cash-flow
INTC Annual Financials Retrieved from
https://www.marketwatch.com/investing/stock/intc/financials/cash-flow
Saunders, A., & Thomas, H. A. L. (1997). Financial institutions management. Boston: Irwin.
Trade Education (n.d). Retrieved from http://www.trade.education/list-of-stock-exchanges/
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