Forms of Businesses

1. Forms of Businesses

2. Sole Proprietorship • A company owned and run by one person who receives its profits or bears its losses. • A proprietorship is NOT separate from its owner, who is liable for the company debts (unlimited liability) • Start / End / Taxes / Workload / Resources $

3. Partnership • A company owned and managed by two or more people who share its profits or losses • A partnership is NOT separate from its owners, who are liable for the company’s debts (unlimited liability) • Start / End / Taxes / Workload / Resources $

4. Corporation • A company legally separate from the stockholders who own it and the managers who run it. • A corporation offers these advantages: • (1) Limited liability, which means that stockholders' responsibility for the company's debts is limited to their investment in its stock;

5. Corporation • (2) long life, which means a corporation continues to exist whenever its stockholders or managers change; • (3) easily transferable ownership, which means that stockholders can easily sell their ownership shares in the stock market (unless its a private company). Start / End / Taxes / Workload / Resources $

6. Corporation • (4) specialized management

7. Stock Ownership • Allows shareholders to attend and vote during the Annual Shareholder’s Meeting • If the shareholder cannot attend, votes may be cast via a PROXY (allows you to assign your voting rights over to an agent)

8. IssueStock • The F I R S T time stock is issued, the money goes directly to the company -- way for companies to raise capital • Investment bankers underwrite the new issue by buying the stock from the corporation and then selling it to the public.

9. Investment Banker • Investment bankers advise their clients on high level issues of financial organization. • They also handle selling a company’s stock to the public.

10. Prospectus • A formal legal document describing details of a corporation. • Generally created for a proposed offering (usually an IPO), but it can still be obtained from existing businesses as well. • Includes company facts that are vitally important to potential investors.

11. Example of Tombstone Ad

12. Newspaper Quotes Column descriptions are located on MHS Website / Personal Finance / “Newspaper Quotes”

13. INTERNET QUOTE

14. What is the ASK Price?

15. Price investors will pay for a stock.

16. What is the BID Price?

17. Price investors will receive for selling a stock

18. What is an EX-Dividend Date?

19. Date after which a stock’s buyer will NOT get the right to receive a dividend.

20. What is Market Capitalization (Market Cap)?

21. Total current market value of all outstanding shares of a company-- $ Stock Price X # of outstanding shares

22. What is a stock symbol?

23. A group of 1-4 letters used in place of a company’s full or abbreviated name

24. Finding stock symbols can sometimes require research

25. Oreo is a B R A N D name, not a company name • Research company who makes Oreos

26. Can’t find Nabisco on the stock market • Private company? • No • Learn  Kraft Foods Company (owner) = Parent Company

27. S U B S I D I A R Y • A company that has at least half of its stock owned by another business

28. P A R E N T C O M P A N Y • A business that controls another company by owning most or all of a company’s stock

29. Finding a Symbol • Is the item a brand or product? • Who makes it? • Not listed on stock market? • private company • Subsidiary • Find ParentCompany

30. Supermarket • Super Market – super market that’s not a grocery store

32. Auction Market • Buyers and sellers interacting by announcing bids and offers and thereby determining prices, usually at a physical location like a trading floor • NYSE (New York Stock Exchange) – largest, oldest, and most widely-known • Hours 9:30 a.m. to 4:00 p.m.

33. NASDAQ • Computerized market that relies on Market Makers •  not a physical place

34. Market Maker • A business that stands ready to buy or sell stock at publicly quoted prices • Keeps an inventory of stock (like a shoe store) • Investors deal directly with market makers, not other investors

35. Bid Price • The highest quoted price at which a market maker is currently willing to BUY a stock

36. Ask Price • The latest quoted price at which a market maker is currently willing to SELL a stock

37. Market Maker • Always quotes a Bid / Ask price and the number of shares it stands ready to buy or sell at those prices

38. Stock Index • Statistical gauge that uses a given number of stocks to measure changes in the overall stock market

39. DOW Jones Industrial Average (DJI) • Formula based on the stock prices of 30 industrial companies • Formula adds up the stocks’ prices and the divides by a certain number to derive the average (D i v i s o r) • The Dow Jones Industrial Average is a key barometer of U.S. equities that is recognized and used the world over.

41. .

43. DOW • Price-weighted - company’s weight or importance depends upon “price’ • i.e. 1% change in a high-priced stock has larger impact than a 1% increase in a lower-priced stock

44. NASDAQ Composite Index (^IXIC) • Nearly 4,000 companies listed on NASDAQ Stock Market • Popular gauge for technology stocks

45. Russell 2000 Index • Gauge of smaller companies • Of 3,000 U.S. largest companies, the smallest 2,000 represent the Russell 2000

46. S & P 500 (GSPC) • Popular measure of stock prices consisting of 500 large companies that represent the major sectors of the U.S. economy • Value-weighted - weight or importance of each company depends upon its market cap ( outstanding shares X price)

47. D O W

48. DOW vs S & P 500

49. Large-Cap Stock • Companies whose market capitalization is large ($$$$$) • $5 Billion or more • IBM  Market Cap: 200.63B

50. Small-Cap Stock • Companies whose market capitalization is small ($$) • Under $500 Million • 1-800-Flowers.com  Market Cap: 454.74M