Assignment one: Stocks

Melissa Blackwelder

Strayer University

FIN 534

Dr. Inez Black

January 13, 2022

In your own words, 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.

Stock exchanges act as a market where buyers connect with sellers. Stocks can be traded on

various exchanges, for example, the Nasdaq or the New York Stock Exchange (NYSE). Most stocks are

traded with the help of brokers. Different exchanges have different requirements to protect investors. The

NYSE uses an auction market where buyers and sellers place bids and offer concurrently (Hayes, 2022).

NYSE still uses a physical trading floor to buy and sell stocks. However, the physical floor is slowly

being phased out and moving towards a more electronic trading system. The NYSE is the largest and

oldest stock company in the U.S. Nasdaq is the leading electronic exchange company. Buyers and sellers

on the Nasdaq connect with over a telecommunication network on computers.

Both NYSE and the Nasdaq are in New York. The New York Stock Exchange uses an auction

market; this means that the price is determined by the highest price a person is willing to bid. The Nasdaq

is a dealer market, a financial market mechanism wherein multiple dealers post prices at which they will

buy or sell a specific security or instrument (Kenton, 2020). In an auction market, participants sell and

buy from each other. In a dealer market, sellers and buyers buy from brokers instead of each other. NYSE

and Nasdaq both use market makers. NYSE lists stocks for traditional blue chips and industrial

companies. The Nasdaq lists stocks for internet and biotechnology companies. One stock listed on the

Nasdaq is Dow Jones, and one stock on NYSE is Carnival Corp.

Using the two stocks you identified, determine the free cash flow from 2018 and 2019. What

inference can you draw from the companies’ free cash flow?

The free cash flow (FCF) is the money a company has left over to repay creditors, interest to

investors, and dividends after accounting for the cash outflows to support operations and maintain their

capital assets. FCF does not include non-cash expenses or interest payments. Free cash flow includes

equipment, assets, and changes in working capital (Fernando, 2021). Dow Jones on the Nasdaq FCF in

2018 was $2,137,000 and $3,960,000 in 2019. NYSE lists Carnival Corp. and their FCF was $1,800,000
in 208 and only $46,000 in 2019. These figures were found by taking the net operating cash flow and

subtracting capital expenditures.

Dow Jones

2018 Net operating cash flow Capital expenditures

4,254,000 (2,117,000)

2019 Net operating cash flow Capital expenditures

5,930,000 (1,970,000)

Carnival Corp.

2018 Net operating cash flow Capital expenditures

5,549,000 3,749,000

2019 Net operating cash flow Capital expenditures

5,475,000 5,429,000

Using the 2019 and 2020 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?
.
 Dow Jones
2019 2020
Current ratio 16,815/10,679= 1.58 19,084/11,108=1.72
Quick ratio 16,815-6,214/10,679=0.99 19,084-5701/11,108=1.20
Total asset turnover 42,951/60,524= 0.70 38,542/61,470= 0.63
Fixed asset turnover 42,951/23,068= 1.86 38,542/22,095= 1.74
Return on equity (1,797)/60,524= (2%) 1,216/61,470= 1.98%
Net profit margin (1,797)/14,094= (12%) 1,216/13,005= 9.35%

Carnival Corp.
2019 2020
Current ratio 2,059/9,127= 0.22 10,563/8,686= 1.22
Quick ratio 2,059-427,000/9,127=0.18 10,563-335,000/8,686= 1.1
Total asset turnover 20,825/45,058= 0.46 5,594/53,593= 0.10
Fixed asset turnover 20,825/38,131= 0.55 5,594/39,444= 0.14
Return on equity (10,236)/25,365= (19%) (10,236)/5,594= (49.80%)
Net profit margin 2,990/20,825=14.36% (10,236)/5,594= (182.98%)

Upon reviewing Dow Jones ratios from 2019-2020. Dow’s current ratio shows that they

have enough to cover their short-term debt; this indicates strength for the company. The quick

ratio shows that they may have had a more challenging time covering debt in 2019 versus 2020,

which is a challenge. The total asset turnover for Dow in 2019 and 2020 shows a weakness in

converting the product into profit. Fixed asset turnover is much better, with a light drop in 2020.

The return on equity is significant for both years and is a weakness. In 2019 the net profit margin

showed a loss, but a considerable increase in 2020 shows a strength.

Carnival Corps. The current ratio in 2019 was meager, with an increase in 2020. Had

there been a catastrophe in 2019, Carnival would not have been able to pay its debt. Quick ratio

still shows that Carnival would not be able to pay off debt. Total assets are a challenge and a

weakness. Overall, Carnival Corp. is in bad shape and could not pay off debt if something
happened. Looking at the Net profit margin, they lost a good bit of profit and made little profit in

2019. Carnival Corp. also did not have a very good year in 2019 or 2020.
 References

Fernando, J. (2021, December 30). Free cash flow (FCF). Investopedia. Retrieved January 17,
2022, from https://www.investopedia.com/terms/f/freecashflow.asp

Hayes, A. (2022, January 6). The NYSE and NASDAQ: How they work. Investopedia. Retrieved
January 17, 2022, from https://www.investopedia.com/articles/basics/03/103103.asp

Kenton, W. (2021, May 19). Dealer market. Investopedia. Retrieved January 17, 2022, from
https://www.investopedia.com/terms/d/dealersmarket.asp

Yahoo! (2022, January 17). Carnival Corporation & plc (CCL) income statement. Yahoo!
Finance. Retrieved January 17, 2022, from
https://finance.yahoo.com/quote/CCL/financials/

Journal, W. S. (n.d.). Dow | Dow Inc.. annual cash flow - WSJ. The Wall Street Journal.
Retrieved January 17, 2022, from
https://www.wsj.com/market-data/quotes/DOW/financials/annual/cash-flow