Alphabet Inc and Netflix Inc

Q – Please read the discussion below and prepare a Reply to this discussion post with comments that further and advance the discussion topic. Please provide the references you used. Ensure zero plagiarism. Word limit: 50 to 70 words please do not exceed the limit. Discussion Alphabet Inc. and Netflix, Inc. The two ratios that are valuable in understanding the financial condition of a company are the quick ratio and the return on equity. The quick ratio is calculated by dividing the most current assets by the total current liabilities. The ratio is chosen because it shows an organization’s ability to finance its current assets using the most liquid assets within a given financial year. A quick ratio above one shows that the organization is financially stable to finance its current debts using the most liquid assets (Keown, Martin & Petty, 2017). The second ratio is return on equity, which is calculated by dividing net income by total equity. The ratio is important because it indicates the organization’s efficiency in using its shareholders’ investments to generate profit. A higher ratio shows that the organization is more efficient at converting shareholders’ investments into profit. The selected companies listed on the NASDAQ stock market are Alphabet Inc. and Netflix, Inc. The reason for choosing the two organizations is because they are top companies that provide wide investment options for shareholders. Alphabet Inc. Quick ratio = (113,762,000 + 40,258,000)/69,300,000 Quick ratio = 154,020,000/69,300,000= 2.222 or 222.2% Return on equity = $59,972,000/256,144,000*100 Return on equity = 23.41% (Alphabet Inc., 2022). Netflix, Inc. Quick ratio = (6,058,452 + 1,586,898)/7,930,974 Quick ratio = 7,645,350/7,930,974= 0.964 or 96.4% Return on equity = $4,491,924/20,777,401*100 Return on equity = 21.62% (Netflix, Inc., 2022). The quick ratios of the two companies provide different information to investors. The Alphabet Inc. ratio shows that the organization has sufficient liquid assets to finance its current debts, thus boosting their confidence in the financial managers of the company. On the other hand, Netflix’s quick ratio is below 100%, an indication that it does not have sufficient liquid assets to finance its current liabilities, which might cause panic among investors. The return on equity of the two firms is close, with a difference of 1.79%. The ratios show that the organizations are making good use of the investors’ capital and would encourage more investment in either of the companies. The article highlights the influence of financial ratios and company reputation on stock prices. The author shows that the changes in the stock price in the financial sector do not only depend on economic factors but also on non-economic factors. Profitability is considered one of the key performance indicators that investors must consider before investing in a particular company, regardless of their international coverage (Harinurdin, 2023). In addition to financial ratios, nonfinancial factors such as the quality of a company attract investors and boost the value of shares and stock prices in the market. The article discusses the benefits of considering financial and non-financial factors when doing business with an organization in Saudi Arabia to avoid losses arising from the organization’s poor performance and inefficiencies. Secondly, the article provides different financial ratios that a potential investor must consider for different companies before making investment decisions. References Alphabet Inc. (2022). Alphabet Inc. (GOOG). Yahoo Finance – Stock Market Live, Quotes, Business & Finance News. https://finance.yahoo.com/quote/GOOG/balance-sheet?p=GOOG Harinurdin, E. (2023). The influence of financial ratio and company reputation on company stock prices financial sector. ICVEAST, 83(1). https://doi.org/10.3390/proceedings2022083047 Keown, A. J., Martin, J. D., & Petty, J. W. (2017). Foundations of finance: The logic and practice of financial management (9th ed.). Pearson Education Limited. Netflix, Inc. (2022). Netflix, Inc. (NFLX). Yahoo Finance – Stock Market Live, Quotes, Business & Finance News. https://finance.yahoo.com/quote/NFLX/financials?p=NFLX