1. Stock Basics
Ms. Zucchero

2. Stock Basics Stock prices change every day
Share prices change because of supply and demand
If more people want to buy a stock (demand) price moves up
If more people want to sell a stock than buy it there will be greater supply than demand, price will fall
This part is easy, understanding what makes people like or dislike a stock is hard

3. Stock Basics
The price movement of a stock indicates what investors feel a company is worth
Not the same as the company’s value - market capitalization
$100 per share and has 1 million shares outstanding has a lesser value than a company that trades at $50 per share and has 5 million shares outstanding
$100 x 1 million = $100 million
$50 x 5 million = $250 million

4. Stock Basics
The most important factor that affects the value of a company is is its earnings
Earnings are the profit a company makes
Public companies are required to report
Better than expected, price of stock will go up
Worse than expected, price of stock will go down

5. Stock Basics Why do stock prices change - nobody really knows for sure
The important things to grasp:
Supply and demand in the market determines stock price
Price times the # of outstanding shares is the value of the company
Comparing just the share price of two companies is meaningless
Earnings of company are what affect investor’s valuation of a company
There is no one theory that can explain everything