Week 2 activity – stocks

Overview

Investing in stocks is an option when planning for retirement or other financial management decisions. In this activity, you will research how to evaluate stocks as an investment option.

Instructions

In a 1–2-page paper, please respond to the following:

1. Explain the differences in stock trading between two different stock exchanges.
   1. Identify two different stock exchanges in the United States.
   2. Describe the similarities and differences between the two stock exchanges.
2. Explain how a company’s free cash flow impacts its growth potential. Cite the free cash flow of example companies.
   1. Identify one company on each of the two stock exchanges you researched in 1.
   2. Determine the free cash flow from 2019 and 2020 for each company.
   3. What inferences can you draw from the companies’ free cash flow?
3. Apply financial ratios to evaluate the strengths and weaknesses of stocks as investments.
   1. 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.
   2. What challenges, strengths, or weaknesses do you see when you examine these ratios?