2. LAP: QS-034

3. Objectives Discuss reasons for trading stocks. Explain different types of stocks.

4. Discuss reasons for trading stocks. Objective

5. Pieces of ownership in a corporationPieces of ownership in a corporation Also called sharesAlso called shares Issued by corporations to raise moneyIssued by corporations to raise money What Are Stocks?

6. Initial public offering—shares become available to investorsInitial public offering—shares become available to investors IPOs and Secondary Market Secondary marketSecondary market  A place where investors can trade securities that have been issued by a corporation  What we commonly call “the stock market”

7. DividendsDividends  Paying investors a portion of the company’s earnings  Not a legal requirement  Most common form is cash  Blue-chip companies Why Invest in Stocks?

8.  When your stock becomes worth more than what you paid for it  Company reinvests income into itself. Reminder—earning money through investments is not guaranteed!Reminder—earning money through investments is not guaranteed! Why Invest in Stocks? $ Capital appreciationCapital appreciation

9. Stockholders receive additional shares of stock for each share they already own.Stockholders receive additional shares of stock for each share they already own. Shares diminish in price, but value remains the same.Shares diminish in price, but value remains the same. No real financial relevanceNo real financial relevance Stock Splits = $5,000

10. Place (physical or virtual) where stocks are traded by brokers who represent buyers and sellersPlace (physical or virtual) where stocks are traded by brokers who represent buyers and sellers NYSENYSE NASDAQNASDAQ Stock Exchanges

11. Increased investor demand = higher stock price Supply and Demand Increased demand Price Decreased demand Price Decreased investor demand = lower stock price

12. Explain different types of stocks. Objective

13. Common stock—basic share of ownership as well as voting rightsCommon stock—basic share of ownership as well as voting rights Types of Stock Preferred stock—basic share of ownership with extra privileges, but no voting rightsPreferred stock—basic share of ownership with extra privileges, but no voting rights

14. Cap sizeCap size  Large-cap  Mid-cap  Small-cap Growth, income, or valueGrowth, income, or value  Growth—achieve capital appreciation  Income—pay higher-than- average dividends  Value—trade at lower-than- average prices Types of Stock (cont’d)

15. Domestic or foreignDomestic or foreign Economic responseEconomic response  Cyclical—go up and down with the economy  Defensive—independent of the economy Speculative—issued by companies that are not yet establishedSpeculative—issued by companies that are not yet established  Penny—cost $1 or less Types of Stock (cont’d)

16. Measure average stock pricesMeasure average stock prices Give a general indication of the direction of the market that dayGive a general indication of the direction of the market that day  Dow Jones Industrial Average  S&P 500  NYSE Composite Index  NASDAQ Composite Index Stock Market Indices S&P 500

17. TSX—Toronto Stock ExchangeTSX—Toronto Stock Exchange International Stock Exchanges LSE—London Stock ExchangeLSE—London Stock Exchange TSE—Tokyo Stock ExchangeTSE—Tokyo Stock Exchange Quick Case

18. MarkED Acknowledgments Original Developers Christopher C. Burke, Sarah Bartlett Borich, MarkED Version 1.0 Copyright © 2007 MarkED Resource Center

19. Digital-based photography sources: DIGITAL STOCK CORP.; Business & Industry 2 Obj. A: #011 Photos copyright 1998 Corbis Corp. 750 Second Street, Encinitas, CA 92024

20. Copyright: All photographic digital images on this CD are owned by the aforementioned photographic resources or their licensors and are protected by the United States copyright laws, international treaty provisions, and applicable laws. No title to or intellectual property rights to the images on this CD are transferred to you. These sources retain all rights and are not to be used, digitally copied, transferred, or manipulated in any way. To do so is a violation of federal copyright laws.