Forms of Businesses

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 $

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 $

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;

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 $

Corporation (4) specialized management

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)

Issue Stock 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.

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.

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.businesses Includes company facts that are vitally important to potential investors.

Example of Tombstone Ad

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

INTERNET QUOTE

What is the ASK Price?

Price investors will pay for a stock.

What is the BID Price?

Price investors will receive for selling a stock

What is an EX-Dividend Date?

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

What is Market Capitalization (Market Cap)?

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

What is a stock symbol?

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

Finding stock symbols can sometimes require research

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

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

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

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

Finding a Symbol 1.Is the item a brand or product? 2.Who makes it? 3.Not listed on stock market? 1.private company 2.Subsidiary 4.Find Parent Company

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

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.

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

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

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

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

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

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

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) DowThe Dow Jones Industrial Average is a key barometer of U.S. equities that is recognized and used the world over.

Industry Company Name Technology 1. Microsoft2. IBM 3. Intel4. Hewlett-Packard Telecommu nications 1. Verizon2. SBC Communications Financial Services 1.Citigroup2. American Express 3. J.P. Morgan4. American Int'l Group.

Manufacturing/heavy industry. 1. Alcoa2. Boeing3. Caterpillars. 4. DuPont5. Exxon Mobil6. Honeywell. 7. GM8. General Electric. 9. 3M10. United Technologies Consumer products/services. 1. Coca-Cola2. Home Depot3.Pfizer. 6. Merck5. McDonald’s4. Johnson & Johnson. 7. Altria Group8. Procter & Gamble9. Wal-Mart. 10. Walt Disney..

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

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

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

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)

= Does the SPY match closely with the S&P 500 index on the chart? ¹ As of 21-Mar-06 L a st Tr a d e: Tr a d e Ti m e: 4:15P M ET C h a n g e: 0.79 (0.61 %) Pr e v Cl o s e: O p e n: Bi d: N/A A sk : N/A N A V¹ : N/A D a y' s R a n g e: w k R a n g e: D O W

DOW vs S & P 500

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

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

Bull and Bear Markets

Bull – prolonged period of rising stock prices Bear – prolonged period of falling stock prices and a general feeling of investor pessimism

MARKET ORDER Order to buy/sell stock at the best possible price a/k/a current price Risk in a Market Order? actual price at which your trade will be executed - unknown

MARKET ORDER What might change the price? -- price moving quickly (volatile) -- placing orders when market is closed

LIMIT ORDER Order to buy/sell stock at a specified price, or better

LIMIT DAY ORDER Execute buy/sell order some time during that trading day No execution  order is automatically cancelled

GTC (Good’til Cancelled) Order stands until it is filled or until investor cancels it Broker policy – may automatically cancel GTC orders after 60/90 days -- may or may not renew a cancelled GTC order for you