1. HW check

2. Vocabulary, MK p 82 1 cash flow 2 equity 3 mutual funds 4 pension funds 5 principal 6 maturity 7 coupon 8 insolvent or bankrupt 9 creditors 10 dividends 11 market makers12 bid / bid price 13 offer / offer price 14 yield

3. Match up verbs with nouns borrow money deduct interest payments finance activitiesissue shares issue bondspay (a rate of) interest pay a (higher) returnpay dividends pay taxreceive interest payments raise money repay principal sell assets deduct taxreceive dividends repay bonds repay moneysell bonds

4. HW check: MK, p 81 Meaning of T-notes, T-bonds and gilts? Who are market makers? Bid vs. offer price? What is a spread? What is inversely related? What does the yield of a bond depend on?

5. More about bonds (MK, p.81) Meaning of T-notes, T-bonds and gilts? Treasury notes, treasury bonds and gilt-e_____ stock (UK) dged

6. DEBT FINANCING ( = SECURITIES*: BONDS (U16) DEBT FINANCING ( = loans) Risk rating: AAA (best) to C (worst) Companies: BONDS an interest paying loan which can be traded on bond markets securities, papers * vrijednosnice Governments: LONG-TERM BONDS: GILTS – GB TREASURY BONDS-USA T-bonds (10+ yrs) TREASURY NOTES-USA T-notes (less than 10 yrs) SHORT-TERM BONDS: TREASURY BILLS (one-year)

7. More about bonds (MK, p.81) Meaning of T-notes, T-bonds and gilts? Treasury notes, treasury bonds and gilt-e_____ stock (UK) Who are market makers? Banks & b________ companies which q____ bid and offer price. Bid vs. offer price? _____ – the highest price that the buyer is willing to pay _____ – the price asked by sellers What is a spread? D________ between the bid & offer prices (bid/ask or buy/sell) What is inversely related? I_____ r____ in the economy & the price of existing bonds. What is the yield of a bond and what does it depend on? I______ given by a bond. It depends on its c______ and its purchase price. dged rokerageuote Bid Offer ifference nterest ate ncomeoupon

8. More about bonds (MK, p.81) Meaning of T-notes, T-bonds and gilts? Treasury notes, treasury bonds and gilt-edged stock (UK) Who are market makers? Banks & brokerage companies which quote bid and offer price. Bid vs. offer price? Bid – the highest price that the buyer is willing to pay Offer – the price asked by sellers What is a spread? Difference between the bid & offer prices (bid/ask or buy/sell) What is inversely related? Interest rates in the economy & the price of existing bonds.WHY? What is the yield of a bond and what does it depend on? Income given by a bond. It depends on its coupon and its purchase price.

9. Debt Finance vs. Equity Finance (MK, p.81) BONDSFOR INVESTORSFOR ISSUERS ADVANTAGE DISADVANTAGE

10. Debt Finance vs. Equity Finance (MK, p.81) BONDSFOR INVESTORSFOR ISSUERS ADVANTAGE DISADVANTAGE generally safer shares pay a higher return bond interest is tax deductible WHAT DOES IT MEAN? debt increases a company’s financial risk HOW?

11. Comprehension CHECK, MK p 82 1 FCan you explain your answer? 2T2T 3T3T 4F4F 5T5T 6F6F 7F7F 8 F Words/expressions to remember? issue, mature, insolvent, coupon, tax advantages

12. Stocks vs. Bonds (video) HANDOUT http://www.investopedia.com/video/play/stocks-versus-bonds Stocks and bonds are the two biggest c____________ of most p_________... Stocks usually provide a l____-t____ g_____ and bonds tend to ensure a s_____ i______ s_____.... Bonds can be bought from l____ and n_______ g__________ and m_____ c__________, and a careful selection of stocks will include both l______ and s_____ c___________ from a d______ group of i_________. A combination of stocks and bonds is good for all kinds of investors. omponentsortfolios ongerm rowth teadyncometream ocalational overnments ajororporations argemallompanies iversendustries

13. Stocks vs. Bonds (video), cont. For aggressive investors who want g_________, bonds may b______ the risk of stocks and stabilize the u____ and d_____ of the market, while stocks can help r___ a_____ investors h____ against the risk of inflation. Thus, stock purchases will provide high reward and help to hedge against inflation while bonds give you a dependable s_____ n___ against stock market losses. rowth alance psowns iskverse edge afetyet

15. REVISION FOUR TYPES OF ORGANISATIONS IN THE PRIVATE SECTOR 1) WITH UNLIMITED LIABILITY __________________ ______________ 2) WITH LIMITED LIABILITY ___________________ Sole proprietorship Partnership Private limited company Public limited company

16. REVISION LIMITED vs. UNLIMITED LIABILITY FOR DEBT In businesses with limited liability, owners are responsible* for their company’s debts up to a certain amount if it goes out of business, and do not have to sell their personal assets to repay the debts. * ______ Source: Longman Business English Dictionary liable

17. LIMITED COMPANIES a legal ______ (independent legal existence from its shareholders) shareholders have limited liability (liable for the amount of capital ________) in case of bankruptcy, assets are __________ and the company is wound up. entity invested liquidated

18. LIMITED COMPANIES owners put ___ the capital (divided into shares) shareholders can _______the AGM and take a share of the profit through dividend shareholders elect a _______________ and a Chairperson the BoD ________managers to run day-to-day business documents which need to be ________ : the Memorandum of Association and Articles of Association Registrar of Companies issues a Certificate of Incorporation up vote at Board of Directors appoint drawn up

19. Synonyms British English companies shares/stock EQUITIES shareholders ordinary shares preference shares flotation Annual General Meeting Articles of Association Memorandum of Assoc. authorised share capital property American English corporations stocks stockholders common stock preferred stock initial public offering Annual Stockholders M. Bylaws Certificate of Incorporation authorized capital stock real estate

20. STOCKS Securities*: -Stocks – equity financing -Bonds – debt financing -money market instruments: (derivatives, futures, options) -* vrijednosnice, vrijednosni papiri  MK, p 87: Reading Stocks and Shares  1J2D3A4F5G 6C7K8E9I 10H 11L12 B

21. Handout: STOCKS & SHARES (1) 1. Most companies begin as ……………. limited companies. 2. If they want to grow / expand they must ………. capital. 3. One way to obtain capital for growth is to ……….., i.e. apply to the stock exchange to become a public limited comp. 4. Smaller or newer companies usually sell their shares on the ………….……. markets. private raise go public over-the-counter

22. STOCKS & SHARES (2) 5. Issuing shares for the first time is known as ………… a company (making a …….........) or _ _ _. 6. To guarantee to purchase all the securities at an agreed price on a certain day, if they cannot be sold to the public: …………….... 7. After stocks have been issued they can be traded on the.................... market at the stock exchange on which the company is.................. 8. The.............. value of a share – the price written on it – is rarely the same as its market price. floatingflotation I P O to underwrite secondary listed nominal

23. A period in which most stocks fall in value is called a............ market, and the period during with most stocks (& the stock.........) are rising is called a......... market. bear indexbull

24. Handout: match phrases with the same meaning Issuing stocks and offering them for sale To underwrite a stock issue Equity Market makers How many sellers and buyers there are The price a stock is currently being traded at on the s.e. A period during which stocks are rising Bear market A period during which stocks are falling Supply and demand Market price Bull market Traders in stock who quote bid & offer prices To guarantee to buy the stocks if there are no other buyers Stocks or shares Going public

25. Vocabulary: match phrases with the same meaning Issuing stocks and offering them for sale To underwrite a stock issue Equity Market makers How many sellers and buyers there are The price a stock is currently being traded at on the s.e. A period during which stocks are rising Bear market Going public To guarantee to buy the stocks if there are no other buyers Stocks or shares Traders in stock who quote bid & offer prices Supply and demand Market price Bull market A period during which stocks are falling

26. HW: RB, p 79 VI Write a summary (200-300 words) of the text based on the notes above