1. What is a Stock? The Stock Market

2. Objectives: What is a Stock?  Explain why there is risk involved in stock ownership.  Make decisions as a group on the benefits of investing in stocks verses costs and/or loss of use of capital.  Calculate gain and loss from sample stock sales  Explain the differences between common stock and preferred stock.  Explain how a company will “go public” by issuing an IPO.

3. Vocabulary: What is a Stock?  common stock  corporation  dividend  earnings  investor  IPO  preferred stock  private company  public company  risk  stock  stock exchange  tombstone ad  Underwriter  volatility

4. Quiz:TYPE 2 writing, 3 minutes Closed book, Open notebook  List two (2) ways people make money in the stockmarket  What are the two (2) basic forms of stock and list one (1) characteristic of each.

5. common stock What is a stock?  Shares of a company that do not guarantee a dividend and have more risk and volatility than preferred shares.  Common stock holders have the benefit of providing shareholders with the right to vote for the board of directors as well as on issues that come before the board at the annual meeting of shareholders.

6. corporation What is a stock? A business that is owned by stockholders and has rights and responsibilities as if it were a person.

7. dividend What is a stock? Part of a company’s profits (earnings) that it pays as money to sotckholders.

8. earnings What is a stock? The amount of money that remains after subtracting the company’s expenses from its revenue.

9. investor What is a stock? Someone who risks funds by purchasing financial products with the hope the investments will increase in value over time.

10. IPO What is a stock? Initial Public Offering; the initial sale of stock to the public by investment bankers.

11. preferred stock What is a stock?  Shares of ownership of a company in which the share holder is guaranteed a dividend if one is declared and whose shares are usually not as volatile as common stock.  Preferred stock holders do not have voting rights in company elections and decisions.

12. private company What is a stock? A company that is owned by a person, family, or small group of investors that does not sell shares of stock in the company to the public.

13. public company What is a stock? A company that is owned by investors who buy shares of stock (partial ownership of the assets of a business) in the corporation usually through one of the stock exchanges.

14. risk What is a stock? The chance of losing all or part of an investment.

15. Stock What is a stock? Ownership of shares in a business.

16. stock exchange What is a stock? Place where shares of publicly held companies are bought and sold.

17. tombstone ad What is a stock? An announcement appearing in financial publications such as the Wall Street Journal announcing a company’s Initial Public Offering (IPO).

18. volatility What is a stock? Indicates how much and how quickly the value of an investment, market, or market sector changes.

19. Profit or Loss on sale of stock Stock Market Calculations (Sale price per share – Purchase price per share) X Number of shares sold Number of shares sold= Profit or Loss (negative no.)

20. Example 1 Stock Market Calculations You purchase 723 shares of Nike at $47.75 per share and one year later you are ready to sell your 723 shares for the current market price of $62.25.

21. Example 1 continued… Stock Market Calculations The profit from the sale of each share of stock is calculated by subtracting the cost per share which was $47.75 from the sale price of $62.25, equaling $14.50. Then you multiply the profit times the 723 shares which is $10,483.50

22. Dividend earnings Stock Market Calculations Dividend per share X Number of shares owned Number of shares owned= Total dividend earnings

23. Example 2 Stock Market Calculations During the year you own Nike stock you earn a dividend of $1.25 per share. You own 720 shares. How much did you earn in dividends?

24. Example 2 continued… Stock Market Calculations You need to multiply the dividend of $1.25 per share times the number of shares you own, which is 720. The result is an earning of $900.

25. Example 3 Stock Market Calculations Starbucks Coffee was selling for $57.12 per share eighteen months ago and you purchased 250 shares. You sold your shares last week for $68.38 per share.

26. Profit or Loss on sale of stock Stock Market Calculations (Sale price per share – Purchase price per share) X Number of shares sold Number of shares sold= Profit or Loss (negative no.)

27. Example 3 continued… Stock Market Calculations Subtract the cost, which was $57.12 per share, from the selling price, which is $68.38 per share. You then take the resulting profit of $11.26 and multiply it times the number of shares, which is 250. Your profit is $2,815.00

28. Example 4 Stock Market Calculations You own 100 shares in each of three companies. Each company pays a dividend. Gillette pays $1.15 per share in dividends. General Electric pays $0.79 per share in dividends. Hershey Foods pays $0.84 per share in dividends.

29. Example 4 continued… Stock Market Calculations You multiply each price times the 100, which represents the number of shares you own of each. $1.15 x 100 = $115; $0.79 x 100 = $79; $0.84 x. 100 = $84. You then add them up to get the total dividends: $278

30. Example 5 Stock Market Calculations Using the information from questions #1 and #3, what was your total profit form the sale of both these companies? Using the information provided in questions #2 and #4, what were your total earnings from dividends?

31. Example 5 continued… Stock Market Calculations You add the profit from the sale in #1 ($10,483.50) and the profit from the sale in #3 ($2,815) to get a total profit of $13,298.50. You add the earnings from #2 ($900) and the earnings from #4 ($278) to get a total earnings of $1,178.