Capstone Investment Case Study
In order to properly utilize the assets of an organization, an organization needs to understand how to properly analyze various investments, how to project cash flows from alternative investments and how to raise funds to finance alternative projects. Having a thorough understanding of how the stock market works and how individual stocks are performing in comparison is a key to making sound investment decisions. The alternatives explored in this case are whether an investment should be made in Coca-Cola, a well-established United States (U.S.) based beverage company, or in Amazon, an internet cloud U.S. based retailer. Similarities are that they are both U.S. based companies with retail divisions, and in …show more content…
companies. Dow Jones & Company was created in 1896 by Charles Dow, Edward T. Jones, and Charles Bergstresser and is now one of the largest, most influential financial news companies owning the DJIA (Investopedia, 2016). The DJIA is one of the most widely used indexes in the world as it represents large cap companies that are many different sectors of the economy (See Appendix A for performance chart of the DJIA from 1996 through 2016).
The stocks that are included on the DJIA are often referred to as ‘blue chip” stocks and when a company is included on the DJIA it is because of its outstanding reputation, its sustained growth and its interest to a large number of investors (Sweet, 2013). Companies tracked by the DJIA include companies such as McDonalds, Coca-Cola, General Electric, American Express, and Exxon Mobil (CNN Money, 2016a). The decision to add or drop a company from this index is made up by a small committee formed by editors of the Wall Street Journal and there are no set rules for inclusion or exclusion (Kennon, 2016). Companies can be dropped by this index if a company continues to experience a falling stock price or it is determined that it is no longer representative of the economy. As the U.S. economy has shifted from manufacturing so has the index which is currently more financial and technology based. The DJIA is used more by investors than the S&P 500 Index or the Nasdaq Composite Index. Currently, Amazon is not included on the DJIA index. (See Appendix B for current list of DJIA