1. Stock Basics
Ms. Zucchero

2. 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

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

4. 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

5. 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

6. Stock Basics
Exchanges vs. Nasdaq

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

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

9. 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 ($43/$1.95).