Stock Basics Ms. Zucchero

Stock Basics Debt vs. Equity Bond vs. Stock Bond Stock Guaranteed return of your money Assume the risk of the company not being successful Principal + Interest Payments Dividend

Stock Basics Risk There are no guarantees when it comes to stocks No obligation to pay dividends Return of 10 to 12 %

Stock Basics Common Stock - majority of stock is issued in this form Represent ownership in a company Claim on a portion of profits Get one vote per share to elect the board members Yields high returns - because entails the most risk Company goes into bankruptcy - Shareholders are not until all debt is Preferred Stock Doesn’t come with the same voting rights Fixed dividend forever Company goes into bankruptcy - Shareholders are paid before creditors Callable

Primary Market - IPO - Initial Public Offering Stock Basics *Most stocks are traded on exchanges *Some exchanges have a physical location - trading floor *The purpose of the stock market is to facilitate the exchange of securities Primary Market - IPO - Initial Public Offering Secondary Market - Investors trade previously-issued securities w/o the involvement of the company

Stock Basics Exchanges vs. Nasdaq

Stock Quote Table Any financial paper has stock quotes that look something like this image

Stock Quote Table Basics Dividend Yield – the percentage return on the dividend – Calculated as annual dividends per share divided by price per share

Stock Quote Table Basics P/E – Price/Earnings Ratio For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).