stocks and stock markets
DESCRIPTION
Stocks and Stock Markets. The Stock Market. Why would a business/corporation want to sell stock? To raise capital to invest in company growth. Example: A Donut Business. One Donut Store. Kroger wants you to supply 10 of their stores with your donuts. You need:. A bigger donut fryer - PowerPoint PPT PresentationTRANSCRIPT
Stocks and Stock Markets
The Stock Market
Why would a business/corporation want to sell stock?
To raise capital to invest in company growth
Example: A Donut Business
Kroger wants you to supply 10 of their stores with your donuts.
One Donut Store
A bigger donut fryerA bigger sugar machineTwo delivery trucksStorage space for suppliesMore floor space for the new equipment5 new employees
You need:
You need $500,000 to expand.You have $100,000 available to invest.What are your options for coming up with the
other $400,000?PartnershipBank loanSell stock to investors
Initial Public Offering - IPOGo through an investment bank/broker who
will sell the shares to the public
How does a company go from private to public ownership?
What is stock?
What can a majority owner do?
Has control to run the company his/her way.
Owns more than 50% of the stock.
What are the two types of stock?
Common and Preferred
What are the advantages of owning common stock?
What are the advantages of owning preferred stock?
Donut shop makes $50K a year with 10,000 shares.
If the shop pays all its profits in dividends, the dividend is $5 per share.
What are dividends?
1. Make a profit 2. Receive a dividend
Why do people purchase stock?
The opinion of buyers regarding the financial future of the company
What determines a stock’s price?
(reflect the reasons people purchase stock)
Growth (stock price increases-short term profit)
Quality of projected dividend payments (long term stream of income)
Two Types of Stock Investments
A place for buying and selling stocks
Is it a real place?
Yes and no, some stock exchanges are virtual or electronic.
What is a stock EXCHANGE?
How do the laws of supply and demand apply to the prices of stocks in a stock market?
What might motivate a buyer to pay a higher price for a company’s stock?
Ex. Why pay more for Exxon than McDonalds?
Quality: long term health of the company, expected earnings & dividends, etc
What are the major stock exchanges?
NYSENASDAQAMEXHow are they different from each other?
New York Stock Exchange
What are stock indices?Stocks grouped by some category
What do they tell you?Price trends in specific industries
What are the major indices?Dow Jones Industrial Average(30 select industrial stocks)
Standard and Poor’s 600 (S&P 500)(500 general stocks)
What is a composite index?NASDAQ CompositeNYSE Compositeby industry
What might an energy index show?