Financial Management | Assignment | Solutions

Running Head: FINANCE
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Financial Management
(Student Details: )
1/26/2020

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Financial Management
Solution 1
There are two popular stock exchanges in the USA include the National Association
for Stock Dealers Automated (NASDAQ) and the New York Stock Exchange. These two
stock exchanges are the largest stock exchanges in the country. It is well aware that both of
the companies deal with big numbers of stock exchanges on a daily basis. In this context, the
NASDAQ was established in 1971 whereas the NYSE was established in the year 1792.
Now, the key difference between the aforementioned stock exchanges is that the NYSE
operates with brokers selling and buying for clients or companies on the exchange floor
whereas the NASDAQ operates with dealers over the telephone of the internet. The stock
chosen and traded through NYSE is Walmart Inc. while the stock traded by NASDAQ is
Microsoft Corporation (Cheng, 2014).
In addition, the key differences between the two stock exchanges are as follows:
Factors NYSE NASDAQ
Perception Companies listed on this stock
exchange are typically
perceived to be comparatively
less volatile
Companies listed on this stock
exchange are typically perceived to
be more volatile as well as growth-
oriented stocks
Indices The NYSE include the indices
such as NYSE composite and
NYSE 100
The NASDAQ indices are
NASDAQ-100, NASDAQ
biotechnology, and NASDAQ
composite.
Foundation Founded in 1792 thus more
than 226 years old
Founded in 1971 thus the stock
exchange is around 50 years young
Market type The stock has an auction
market
The stock has a dealer’s market
On the other hand, it has been found that both the chosen stock exchanges have very
few similarities. The foremost similarity is that the NYSE and NASDAQ are public entities
which are accounting for the major portion of equities as well as fixed incomes traded in the
United States during weekdays from 9:30m to 4:00 pm ET (Clayman, Fridson, & Troughton,

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2012). Apart from this, both of the stock exchanges are using traffic controllers for
troubleshooting specific traffic issues and thereby assure orderly and smooth markets for their
clients. Lastly, both the stock exchanges include NYSE and NASDAQ trade on themselves
while they do not find buyers or sellers and hence both are needed to follow regulations set
by the Securities and Exchange Commission (Clayman, Fridson, & Troughton, 2012).
Solution 2
The two companies traded by NYSE and NASDAQ are Walmart and Microsoft.
Hence free cash flows of the two companies during 2015 and 2016 are as follows:
In general, the presence of free-cash-flow always indicates that an organization is
having cash to expand, buy back stock, develop new products, pay dividends, as well as to
minimize their debt. In this way, a high, as well as rising free-cash-flow is always a sign of a
wealthy and healthy financial condition of the company which is thriving in their current

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environment. Thus, interpretation of the above calculated free cash flows of Microsoft and
Walmart is as follows:
In the case of Walmart, the total free cash flow is decreasing from $16,960.00 to
$16,710.00 which is clearly depicting a declining free cash flow graph. In this context,
companies with declining free cash flow can expect a decline in earnings growth and worse.
Thus, Walmart might have to take on high levels of debt and hence may face declining
liquidity in near future (Clayman, Fridson, & Troughton, 2012).
In the case of Microsoft, the total free cash flow is increasing from $23,724.00 to
$24,982.00, which is showing an increasing free cash flow graph. Thus, Microsoft Co. is able
to pursue opportunities that enhance shareholders’ value and business growth. Moreover, the
company can is having more cash coming in from operations and hence it could be spent on
capital expenditures like office equipment, buildings, patents, land, machinery and many
more (ConnectAmericas, 2020).
Solution 3
The financial ratio analysis of the two companies includes Microsoft Co. and Walmart
Inc. has been done for the fiscal years 2017 and 2018 with the help of financial statements of
the two firms. In this context, two ratios from each category include asset management ratios,
liquidity ratios, as well as profitability ratios; have been calculated so that challenges,
strengths, as well as weaknesses in the context of the two chosen firms, can be articulated
(Nicolás Marín Ximénez & Sanz, 2014).
Ratio analysis of Walmart Incorporation
Ratio Analysis for Walmart Company for the fiscal year 2017-2018
Particulars Amount ($)
2018 2017
current assets 59,664,000,000 57,689,000,000
current liabilities 78,521,000,000 66,928,000,000
stock inventory 43,783,000,000 43,046,000,000
total liabilities 123,700,000,000 118,290,000,000
total assets 204,522,000,000 198,825,000,000

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total equity (shareholder equity) 80,822,000,000 80,535,000,000
net profit (loss) 10,523,000,000 14,293,000,000
net sales 500,343,000,000 485,873,000,000
Ratio calculations Formulas 2018 2017
liquidity analysis Numbers
current ratio current assets 0.76 0.86
current
liabilities
quick ratio CA-stock 0.20 0.22
current
liabilities
Profitability analysis %
Net profit margin Net profit 2.10% 2.94%
sales
Return on assets Net profit 5.15% 7.19%
Total assets
Asset management ratios
Total assets turnover sales/total assets 2.45 2.44
Inventory turnover ratio sales/inventory 11.43 11.29
Based on the above financial ratio analysis, asset management ratios, liquidity ratios,
and profitability ratios have been calculated. Walmart’s current ratio is 0.86 and 0.76 for the
two years which is showing that the company has more current liabilities as compared to its
current assets. Based on (Clayman, Fridson, & Troughton, 2012), it means that the company
may face challenges while paying its short-term bills. The quick ratio of the firm is 0.22 and
0.20 which depicts the ratio of the most liquid of current assets by current liabilities. Thus, by
seeing at the value of the quick ratio of the firm, it can be said that the firm must increase its
quick assets in contrast to current liabilities. In addition, the net profit margin and ROA of the
firm are good which is showing that the company’s profitability is high (Cheng, 2014).
Besides, the asset management ratios are 2.44 and 2.45 for the years 2017 and 2018, which is
showing that Walmart is efficiently utilizing total assets.

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Ratio analysis of Microsoft Co
Ratio Analysis for Microsoft Company for the fiscal year 2017-2018
Particulars Amount ($)
2018 2017
current assets 169,662,000,000 159,851,000,000
current liabilities 58,488,000,000 64,527,000,000
stock inventory 2,662,000,000 2,181,000,000
total liabilities 176,130,000,000 168,692,000,000
total assets 258,848,000,000 241,086,000,000
total equity (shareholder
equity) 82,718,000,000 72,394,000,000
net profit (loss) 41,094,000,000 39,240,000,000
net sales 110,360,000,000 89,950,000,000
Ratio calculations Formulas 2018 2017
liquidity analysis Numbers
current ratio current assets 2.90 2.48
current liabilities
quick ratio CA-stock 2.86 2.44
current liabilities
Profitability analysis %
Net profit margin Net profit 37.24% 43.62%
sales
Return on assets Net profit 15.88% 16.28%
Total assets
Asset management ratios
Total assets turnover sales/total assets 0.43 0.37

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Inventory turnover ratio sales/inventory 41.46 41.24
In this context, the current ratio and quick ratio values of Microsoft are clearly
showing the above firm is managing their current assets in a combination of current liabilities
very well. The company is capable enough to pay their short term bills and payments. As
compared to Walmart, Microsoft is doing well in terms of liquidity, profitability and asset
management. It is because the net profit margin and return on assets are having appreciable
values. Based on, (Assetratio, 2019), the company is using their assets efficiently and
effectively which is quite clear from the ratios include inventory turnover ratio and total
assets turnover ratio.

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References
Assetratio. (2019). Fixed Asset Turnover Ratio Formula. Retrieved 2019, from
https://www.myaccountingcourse.com/financial-ratios/fixed-asset-turnover
Cheng, B. I. (2014). Corporate social responsibility and access to finance. Strategic
management journal, 1-23.
Clayman, M. R., Fridson, M. S., & Troughton, G. H. (2012). Corporate finance: a practical
approach (2nd ed., Vol. 42). New Jersey: John Wiley & Sons.
ConnectAmericas. (2020). What decisions must a Financial Manager make? Retrieved 2020,
from https://connectamericas.com/content/what-decisions-must-financial-manager-
make
Nicolás Marín Ximénez, J., & Sanz, L. (2014). Financial decision-making in a high-growth
company: the case of Apple incorporated. Management Decision, 52(9), 1591-1610.