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Stocks and Stock Markets

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

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Stocks and Stock Markets

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  1. Stocks and Stock Markets

  2. The Stock Market

  3. Why would a business/corporation want to sell stock? To raise capital to invest in company growth

  4. Example: A Donut Business

  5. One Donut Store • Kroger wants you to supply 10 of their stores with your donuts.

  6. You need: • Abigger donut fryer • A bigger sugar machine • Two delivery trucks • Storage space for supplies • More floor space for the new equipment • 5 new employees

  7. 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? Partnership Bank loan Sell stock to investors

  8. How does a company go from private to public ownership? • Initial Public Offering - IPO • Go through an investment bank/broker who will sell the shares to the public

  9. What is stock?

  10. What can a majority owner do? • Has control to run the company his/her way. • Owns more than 50% of the stock.

  11. What are the two types of stock? • Common and Preferred

  12. What are the advantages of owning common stock?

  13. What are the advantages of owning preferred stock?

  14. What are dividends? • 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.

  15. Why do people purchase stock? • Make a profit • Receive a dividend

  16. What determines a stock’s price? • The opinion of buyers regarding the financial future of the company

  17. Two Types of Stock Investments (reflect the reasons people purchase stock) • Growth (stock price increases-short term profit) • Quality of projected dividend payments (long term stream of income)

  18. What is a stock EXCHANGE? • A place for buying and selling stocks • Is it a real place? • Yes and no, some stock exchanges are virtual or electronic.

  19. How do the laws of supply and demand apply to the prices of stocks in a stock market?

  20. 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

  21. What are the major stock exchanges? • NYSE • NASDAQ • AMEX • How are they different from each other?

  22. New York Stock Exchange

  23. What are stock indices? Stocks grouped by some category • What do they tell you? Price trends in specific industries

  24. What are the major indices? • Dow Jones Industrial Average • (30 select industrial stocks) • Standard and Poor’s 600 (S&P 500) • (500 general stocks)

  25. What is a composite index? NASDAQ Composite NYSE Composite by industry • What might an energy index show?

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