STOCKS Xh4

RAISING CAPITAL A) borrow from friends B) use your personal assets C) borrow from banks by taking out a loan – it must be paid back with interest D) issue shares or equities (certificates representing units of ownership of a company) – share capital is the money provided by issuing shares E) issue bonds which will be bought by idividuals or financial institutions – bonds are loans that pay interest and are repaid at a fixed future date Read the text on p. 69 in RB

SHARES OR STOCKS Why to invest in shares? Why to issue shares?

REVISION FOUR TYPES OF ORGANISATIONS IN THE PRIVATE SECTOR 1) WITH UNLIMITED LIABILITY __________________ 2) WITH LIMITED LIABILITY __________________

REVISION FOUR TYPES OF ORGANISATIONS IN THE PRIVATE SECTOR 1) WITH UNLIMITED LIABILITY Sole proprietorship Partnership 2) WITH LIMITED LIABILITY Private limited company Public limited company

REVISION LIMITED vs. UNLIMITED LIABILITY FOR DEBT In businesses with limited liability, owners are ______ (_______) for their company’s debts up to a certain amount if it goes out of business, and do not have to sell their personal assets to repay the debts

REVISION LIMITED vs. UNLIMITED LIABILITY FOR DEBT In businesses with limited liability, owners are liable (responsible) for their company’s debts up to a certain amount if it goes out of business, and do not have to sell their personal assets to repay the debts

LIMITED COMPANIES A legal ________ (independent legal existence from its shareholders) Shareholders have limited liability (______ for the amount of capital ______) In case of bankruptcy, assets are ________ and company is ________ ___)

LIMITED COMPANIES A legal entity (independent legal existence from its shareholders) Shareholders have limited liability (liable for the amount of capital invested) In case of bankruptcy, assets are liquidated and company is wound up)

LIMITED COMPANIES Owners ______________(divided into shares) Shareholders can _____________ and take a share of the profit through dividend Shareholders _______________ and a Chairperson The BoD _______________ to run day-to-day business _________ which need to be _________ : the Memorandum of Association and Articles of Association

LIMITED COMPANIES Owners put up the capital (divided into shares) Shareholders can vote at the AGM and take a share of the profit through dividend Shareholders elect a Board of Directors and a Chairperson The BoD appoint a CEO to run day-to-day business Documents which need to be drawn up : the Memorandum of Association and Articles of Association

PRIVATE  PUBLIC LIMITED COMPANY FLOTATION/ IPO / GOING PUBLIC Change a private company into a public company by issuing shares and sliciting the public to purchase them  The bank has closed its initial public offer early because of overwhelming demand from investors.  The price of the company’s shares on the day it floated on the stock market beat all expectations  Investors expected the share price to rise steeply after the company went public. MK, p. 87: Reading Stocks and Shares

STOCKS AND SHARES 1 1.Most companies begin as ________ limited companies. 2.If they want to grow they must ______ capital. 3.One way to obtain capital for growth is to ___ ______, i.e. apply to the stock exchange to become public limited company. 4.Smaller or newer companies usually sell their shares on the _____________ markets.

STOCKS AND SHARES 1 Most companies begin as private limited companies. If they want to grow they must raise capital. One way to obtain capital for growth is to go public, i.e. apply to the stock exchange to become public limited company. Smaller or newer companies usually sell their shares on the over-the-counter markets.

STOCKS & SHARES (2) 5. Issuing shares for the first time is known as________ a company (making a________) or IPO. 6. To guarantee to purchase all the securities at an agreed price on a certain day, if they cannot be sold to the public: to __________

STOCKS & SHARES (2) 5. Issuing shares for the first time is known as flotating a company (making a flotation) or IPO. 6. To guarantee to purchase all the securities at an agreed price on a certain day, if they cannot be sold to the public: to underwrite

What are stocks? 1.What is a stock? 2.What does a stockholder have a claim on? 3.What is given to investors who invest money into the company? 4.What does each of the certificates represent? 5.Does the value of a share rise proportionally with the value of the company? 6.How can an investor who possesses some shares raise more profits?

What are stocks? Watch an investopedia film and answer the questions from the previous slide. LzQ LzQ

VOCABULARY Companies going public..... I______ shares A______ to a stock exchange J_____ over-the-counter market A_____ to be quoted or listed on a stock exchange F______ a large number of requirements U______ an investment bank to underwrite the issue

VOCABULARY Companies going public..... Issue shares Apply to a stock exchange Join over-the-counter market Apply to be quoted or listed on a stock exchange Fulfill a large number of requirements Use an investment bank to underwrite the issue

STOCK EXCHANGE the primary market (issuing shares) the secondary market (trading shares)

a) computerized trading systems b) market makers – traders in stocks quote bid - buying prices offer - selling prices

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STOCK INDEXES measure stock markets show changes in the average prices of a selected group of important stocks the Footsie – the FT 100 share Index the Dow Jones – 30 large companies

BULL MARKET A period during which most stocks and the stock index are rising

BEAR MARKET A period during which most stocks and the stock index are falling

NOMINAL VALUE OF SHARES (FACE OR PAR VALUE) a)nominal value – the price written on it b)the current market value (rarely the same)

PEOPLE BUY SHARES 1.part of the ownership 2.proportion of a company’s profits as a dividend 3. make a capital gain by selling their shares at a higher price

PROFITS pay annual dividends keep the profits the value of the stocks rises

SHARES res/#ixzz47dDmLdmj res/#ixzz47dDmLdmj res/ res/ Source: Investopedia

British English Companies Shares/stock/ equities Shareholders Ordinary shares Preference shares Floatation Annual General Meeting Articles of Association Memorandum of Assoc. Authorised share capital property American English Corporations Stocks Stockholders Common stock Preferred stock Initial public offering Annual Stockholders M. Bylaws Certificate of Incorporation Authorized capital stock Real estate