You will need: GE and Amazon2013 & 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 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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Stocks
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Amounts
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NYSE- General Electric - GE
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2013
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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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Stock
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Amounts
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NASDAQ- Amazon Inc - AMZN
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2013
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2014
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Sales
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- Cost of Goods Sold (COGS)
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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
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2013
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2014
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NYSE - General Electric
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NASDAQ - Amazon
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You will need GEs and Amazon two most recent annual reports, e.g., 2016 & 2017 to answer Q#3
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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
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2016
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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- AMZN
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2016
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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
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2016
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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- AMZN
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2016
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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
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2016
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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- AMZN
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2016
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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
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2016
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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- AMZN
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2016
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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 - Operatingand 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
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2016
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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- AMZN
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2016
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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
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2016
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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- AMZN
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2016
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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