Presentation on theme: "1920s Boom & Crash The Stock Market. Origin of the term stock Comes from the early days when corporations were called joint stock companies Stock mean."— Presentation transcript:
1920s Boom & Crash The Stock Market
Origin of the term stock Comes from the early days when corporations were called joint stock companies Stock mean the total sum of goods or raw materials on hand for trade
Men pooled their stock such as ships, goods, employees, building to form a large business Today the word capital is used to describe what once was called stock
What is a share? A share is a certificate of partial ownership in a joint stock company A share can be bought and sold
Stock A certificate of ownership in a corporation
Definition of the Stock Market A place where stocks and bonds are bought and sold.
Economic growth An extended period of time during which the economy expands existing businesses expand new businesses are created more jobs are created
Recession A prolonged period in which the economy contracts
Depression A recession that is especially long and severe
Recovery Economic contraction stops and expansion once again takes place
Recession Recovery Depression Stock Market Terminology GrowthRateGrowthRate Time Growth
The Bear Market A market in which prices fall over a period of 6 months
The Bull Market A market in which prices rise over a period of 6 months
They need money to: Start Run Expand Why do businesses sell stock?
Wendys wants to build more restaurants or add a buffalo wings to its menu. It takes money to buy land, build restaurants, and develop and advertise new menu items. Example:
Where Wendys get money? Use own capital ($) Borrow from bank Sell stocks on the stock market
Why not use your own money? Not enough Too risky
Why not borrow from a bank? High interest rates Stringent regulations Collateral required to guarantee the loan
Why sell shares of stock? Fewer regulations Share risk with investors
Savings account Invest in Stock Market How can you use your money to make money?
Why a Savings Account? Earn interest Low risk Government Insurance - FDIC (Federal Deposit Insurance Corporation)
Invest in the Market? Earn dividends - share of the profit Speculate - buy low/sell high Risk No insurance
1920s Market No government regulations Buy on margin (Borrow $) Easy credit from banks Speculation v. investments