Stocks

Stock Exchanges

Question 1

The New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation (NASDAQ) are the two currently existing stock exchanges in the United States. The NYSE was founded in 1792 to list the then existing companies in the United States market and NASDAQ was founded in 1971 and currently list technological organization globally. The NYSE is currently the world leading stock exchange whose value is equal and larger than the value of combined NASDAQ, Tokyo, and London stock exchange. Firms should meet the listing standards stipulated by the security and exchange commission. This requirement applies to all firms both locally and globally.

Firms are not restricted on their choice of stock exchange and their choices depend on the type of market they want. NYSE is an auction market where sellers and buyers enter bids competitively at the same time while NASDAQ is a dealer market where by the dealers post the prices of specific stock they wish to sell or buy.

Both firms also differ in the location where their transaction occurs. NYSE has retained its trading to its physical trading floor. However, some of them occur at its Mawah, New Jersey data center (Lobel, 2018). NASDAQ on the other hand have no physical trading floor and they provide services through direct trading between investors and market markers which happens through an online platform.

NASDAQ uses market makers to control its traffic problem while NYSE uses a controller known as specialist to control its market traffic. The traffic controllers helps in controlling the stock price, which include setting the opening prices for stocks, accepting limit orders, and moderating interest of some specific stock (Lobel, 2018).

Selected stock

NYSE

Exelon : https://finance.yahoo.com/quote/EXC/

Exelon is a US based firm that deals with providing of energy to the residents in the United States. The firm basically deals with power generation, energy sales, and transmission. The company operates in 28 states in Unites States and some part of Canada. The company has employed approximately 35, 000 people and according to the 2018 financial report the company generated approximately $ 36 billion (Yahoo Exelon, 2019). The company list its stock with NYSE stock exchange which allows stock buyers and sellers to transact their businesses.

NASDAQ

Akorn: https://finance.yahoo.com/quote/AKRX/

Akorn is pharmaceutical company that deals with production of pharmaceutical products and sell them to various consumers across the United States. These pharmaceutical products that the firm produces include generic and branded prescription for both human and animal consumption. These products are in the form of injectable, ophthalmic, oral liquids among others (Yahoo Akorn, 2019). The company has development facilities in various locations such as Vernon hills, Illinois; Copiague, New York; and Cranbury. The company also has subsidiaries in India and Switzerland.

Free cash flows

Exelon

Free Cash Flows = Cash from Operations – capital expenditure

2017

FCP = 7,480,000 – 7, 584, 000= - 104, 000

2018

FCP = 8,644,000 – 7, 748, 000 = 896, 000

Inference

An increment in the capital means that the firm income from non-capital assets increased in 2018 and further indicates that it has improved in its operations.

Akorn

Free Cash Flows = Cash from Operations – capital expenditure

2017

FCP = 249, 264, 000 – 95,170, 000 = 154, 094,000

2018

FCP = -68,894, 000 - 69, 111, 000 = -138,005,000

Inference

The firm experienced the decline in free cash due to declining investment in non-capital assets

Financial ratios

Liquidity ratio

Calculation for Liquidity Ratio
Akorn	2017	2018
Current assets	730, 151, 000	583, 819, 000
Current liabilities	171, 089, 000	170, 823, 000
Current ratio	4.27	3.42

Calculation for Liquidity Ratio
Exelon	2016	2017
Current assets	11,896,000	13,360,000
Current liabilities	11,404,000	10,798,000
Current ratio	1.04	0.12

Asset Management ratio

Calculation for Asset Management Ratio
Exelon
	2017	2018
Sales	35,565,000	35,985,000
Assets	119,666,000	116,770,000
Ratio	0.30	0.31

Calculation for Asset Management Ratio
Akorn
	2017	2018
Sales	841,045,000	694,018,000
Assets	1,909,511,000	1,495,257,000
Ratio	0.44	0.46

Profitability Ratio

Exelon Profitability Calculation
	2016	2017
Net income	3,786,000	2,010,000
Sales	35,565,000	35,985,000
Ratio	0.12	0.06

Akorn Profitability Calculation
	2017	2018
Net income	-24,550, 000	-401,909,000
Sales	841,045,000	694,018,000
Ratio	0.12	0.58