1. © Prentice Hall, 2004Business In Action 2eChapter 14 - 1 Understanding Banking and Securities

2. © Prentice Hall, 2004Business In Action 2eChapter 14 - 2 Characteristics of Money Medium of exchange Measure of value Store of value

3. © Prentice Hall, 2004Business In Action 2eChapter 14 - 3 Forms of Money Currency Demand deposits Time deposits

4. © Prentice Hall, 2004Business In Action 2eChapter 14 - 4 Substitutes for Currency and Checks Credit cards Debit cards Smart cards

5. © Prentice Hall, 2004Business In Action 2eChapter 14 - 5 Financial Institutions Deposit  Commercial banks  Savings and loans  Mutual savings banks  Credit unions Nondeposit  Insurance companies  Pension funds  Finance companies  Brokerage firms

6. © Prentice Hall, 2004Business In Action 2eChapter 14 - 6 Types of Loans Consumers  Mortgage  Automobile  Home-improvement  Student loan Businesses  Expansion  New equipment  Construction  Line of credit

7. © Prentice Hall, 2004Business In Action 2eChapter 14 - 7 Electronic Banking Automated teller Electronic funds transfer Online banking

8. © Prentice Hall, 2004Business In Action 2eChapter 14 - 8 Bank Safety and Regulation Federal Deposit Insurance Corporation National Credit Union Association State Banking Commission Office of the Comptroller of the Currency Office of Thrift Supervision Federal Reserve System

9. © Prentice Hall, 2004Business In Action 2eChapter 14 - 9 Evolving U.S. Banking Environment Glass-Steagall Act (1933) Financial Services Modernization Act (1999) Bank Holding Act (1956) Riegle-Neal Banking Efficiency Act (1994)

10. © Prentice Hall, 2004Business In Action 2eChapter 14 - 10 Securities Investments Stocks Mutual funds Bonds

11. © Prentice Hall, 2004Business In Action 2eChapter 14 - 11 Stocks: Important Terms Authorized stock Issued stock Unissued stock Stock split Par value

12. © Prentice Hall, 2004Business In Action 2eChapter 14 - 12 Common Stock Voting rights Dividends Limited liability Liquidity

13. © Prentice Hall, 2004Business In Action 2eChapter 14 - 13 Preferred Stock Convertible preferred stock Cumulative preferred stock

14. © Prentice Hall, 2004Business In Action 2eChapter 14 - 14 Corporate Bonds Secured bonds Debentures Convertible bonds

15. © Prentice Hall, 2004Business In Action 2eChapter 14 - 15 Corporate Bond Ratings InterpretationMoody’sS&PInterpretation Highest ratingAaaAAAPrime quality Very strong capacity to payAaAAHigh grade Highest ratingAaaAAAPrime quality Strong capacity to pay; somewhat susceptible to changing business conditions AAUpper-medium grade Very strong capacity to payAaAAHigh grade More susceptible than A rated bonds BaaBBBMedium grade Strong capacity to pay; somewhat susceptible to changing business conditions AAUpper-medium grade Somewhat speculativeBaBBSomewhat speculative More susceptible than A rated bonds BaaBBBMedium grade SpeculativeBB Somewhat speculativeBaBBSomewhat speculative Vulnerable to nonpaymentCaaCCCPoor standing;may be in default SpeculativeBB Highly vulnerable to nonpayment CaCCHighly speculative; often in default Vulnerable to nonpaymentCaaCCCPoor standing;may be in default Bankruptcy petition filed or similar action taken CC Lowest rated; extremely poor chance of ever attaining real investment standing Highly vulnerable to nonpayment CaCCHighly speculative; often in default

16. © Prentice Hall, 2004Business In Action 2eChapter 14 - 16 U.S. Government Securities and Municipal Bonds Treasury notes Treasury bills Treasury bonds U.S. savings bonds

17. © Prentice Hall, 2004Business In Action 2eChapter 14 - 17 U.S. Government Securities and Municipal Bonds Municipal bonds General obligation bonds Revenue bonds Capital gains

18. © Prentice Hall, 2004Business In Action 2eChapter 14 - 18 Mutual Funds: Important Terms Load fund No load fund Open end fund Closed end fund

19. © Prentice Hall, 2004Business In Action 2eChapter 14 - 19 Types of Mutual Funds Money market Growth Balanced Income Global International Index

20. © Prentice Hall, 2004Business In Action 2eChapter 14 - 20 Securities Market Primary –Initial public offerings Secondary –Securities exchanges

21. © Prentice Hall, 2004Business In Action 2eChapter 14 - 21 Securities Exchanges Trading floor –New York Stock Exchange (NYSE) Over-the-counter market –National Association of Securities Dealers (NASDAQ)

22. © Prentice Hall, 2004Business In Action 2eChapter 14 - 22 Buying and Selling Securities Auction exchange (NYSE) –Exchange floor –Stock specialist Dealer exchange (NASDAQ) –Computer –Market maker Electronic communication networks –Computer –Broker

23. © Prentice Hall, 2004Business In Action 2eChapter 14 - 23 Orders to Buy and Sell Securities Market order Limit order Day order Margin trading Stop order Open order Short selling Discretionary order

24. © Prentice Hall, 2004Business In Action 2eChapter 14 - 24 Analyzing Financial News Bull market –Rising market Bear market –Falling market

25. © Prentice Hall, 2004Business In Action 2eChapter 14 - 25 Watching Market Indexes and Averages Dow Jones Industrial Average (DJIA) Standard and Poor’s 500 (S&P 500) Wilshire 500 NASDAQ Composite Index Nikkei 225 Index FT-SE 100 Index

26. © Prentice Hall, 2004Business In Action 2eChapter 14 - 26 Interpreting Financial News Stock exchange reports Bond quotation tables Mutual fund quotations

27. © Prentice Hall, 2004Business In Action 2eChapter 14 - 27 Industry Challenges Electronic trading Round-the-clock trading Online trading

28. © Prentice Hall, 2004Business In Action 2eChapter 14 - 28 Regulation of the Securities Market SEC filing requirements Fair disclosure regulations Securities fraud