1. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 1 Securities

2. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 2 Securities Investments Stocks Bonds Mutual funds

3. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 3 Stocks: Important Terms Stock certificate Authorized stock Issued stock Unissued stock Par value Stock split

4. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 4 Common Stock Voting rights Dividends Limited liability Liquidity

5. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 5 Preferred Stock Convertible preferred stock Cumulative preferred stock

6. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 6 Corporate Bonds Secured bonds Debentures Convertible bonds

7. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 7 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

8. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 8 U.S. Government Securities and Municipal Bonds Treasury notes Treasury bills Treasury bonds U.S. savings bonds Municipal bonds Revenue bonds Capital gains General obligation bonds

9. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 9 Retirement of Debt Serial bonds Term bonds Sinking fund Callable bonds

10. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 10 Mutual Funds: Important Terms Load fund No load fund Open end fund Closed end fund

11. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 11 Types of Mutual Funds Money market Growth Balanced Income Global International Index

12. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 12 Options and Financial Futures Call options –Buyers –Sellers Put options –Buyers –Sellers

13. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 13 Speculating in Commodities Agricultural products Raw materials

14. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 14 Securities Market Primary –Initial public offerings Secondary –Stock exchanges

15. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 15 Types of Stock Exchanges Auction –NYSE Dealer –NASD Electronic –ECNs

16. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 16 Buying and Selling Securities Auction exchange (NYSE) –Exchange floor –Stock specialist Dealer exchange (NASDAQ) –Computer –Market maker Electronic communication networks –Computer –Broker

17. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 17 Changing Securities Marketplaces 20 th Century –Bull market –Aggressive growth –Increased employment –Earnings growth 21 st Century –Bear market –Conservative growth –Increased layoffs –Reduced earnings

18. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 18 Changing Securities Marketplaces Online trading Extended hours

19. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 19 Regulation of Securities Markets Federal laws State laws Industry self-regulation

20. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 20 Ask These Questions Before You Invest 1.Is the investment registered with the SEC? 2.Have you read the audited financial statements? 3.Is a registered broker offering the investment? 4.What’s in it for the person touting the investment? 5.Should you trust e-mail/bulletin board advice?

21. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 21 Ask These Questions Before You Invest 6.Are you being pressured to act? 7.Does the investment promise you’ll get rich quick? 8.Does the investment match your objectives? 9.How easy would it be to sell your investment later? 10.Does the investment originate overseas?

22. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 22 Investment Objectives Income Growth Safety Liquidity Tax concerns

23. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 23 Investment Portfolio Rate of return –Asset allocation –Diversification

24. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 24 Buying and Selling Securities Market Order Limit Order Day Order Margin Trading Stop Order Open Order Discretionary Order Short Selling

25. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 25 Analyzing Financial News Bull market –Rising market Bear market –Falling market

26. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 26 Watching Market Indexes and Averages Dow Jones Industrial Average (DJIA) Standard and Poor’s 500 (S&P 500) Wilshire 5000 NASDAQ Composite Index Nikkei 225 Index FT-SE 100 Index

27. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 18 - 27 Interpreting Financial News Stock exchange reports Bond quotation tables Mutual fund quotations