1. List 1 expense that a business needs money for

2. Financing a Business: Stocks

3. Forming a Corporation
To become a corporation, a business (proprietorship or partnership) must INCORPORATE

4. Why Incorporate?
Usually, proprietorships or partnerships incorporate (become a corporation) in order to raise a large amount of money to raise capital & expand the business

5. How? Through an Initial Public Offering (IPO)
An investment bank (like JP Morgan Chase) will manage the IPO
The bank will split the company into shares & sell those shares to the public
Bank will take a portion of the $ for fees
The rest of the $ will go to the corporation that will be used to accumulate resources (land, labor & capital)

6. Simplified Example of an IPO
Small airline wants to incorporate
Hires Goldman Sachs as an investment bank
Files the necessary papers to the Security Exchange Commission (SEC)
Has an Initial Public Offering
10 Million shares are sold to the public at $50 each
Goldman Sachs takes $5 Million for fees
The airline raised $495 million for resources

8. Is a piece of ownership in a corporation
Share of Stock. . .
Is a piece of ownership in a corporation
When the value of the corporation changes, so does the share of the stock

9. Definition of Value
An amount that is considered fair enough where people will be willing & able to pay you in return for a good or service

10. Value of a company is based on…
Potential for growth
Reputation (past history)
Internal & external events

11. Examples of internal Events that effect stock value
New products
Quarterly financial reports
Changes in leadership
Production delays
Advertising campaigns
Paying out of dividends (profits distributed out to shareholders)

12. Examples of external events that effect stock value
International tragedies
Price of oil changes
War
Inflation
Political Instability
Terrorism
Strength of the economy (financial statistics)
Unemployment rates

13. Understanding Stock Market Reports

14. Ticker Symbol
This is the unique alphabetic name which identifies the stock.

15. Trading Volume
How active a stock has been traded. It’s the number of shares that have been bought & sold in a day

16. High and Low
High – Highest price the stock has sold for in a given time period (Day, Year, etc.)
Low – Lowest price the stock has sold for in a given time period

17. Dividend
The profits distributed per share of stock. If it is blank, the corporation did not pay out dividends.

18. The last price that the stock sold for at the end of the previous day.
Close
The last price that the stock sold for at the end of the previous day.

19. Net Change -
$ value change in the stock price from the previous day's closing price.

20. Blue Chips
Stock of a well-established and financially-sound company that has demonstrated its ability to pay dividends in both good and bad times
These stocks are usually less risky than other stocks.

21. Different Types of Stock
Common - Provides shareholders with a voice in how the company is run and a share in any potential dividends
Preferred –
Receive dividends before common stockholders
Nonvoting ownership of the corporation

22. Bull and Bear Markets
BULL - Label for the stock market when it is doing well and confidence is high
BEAR – Label for the stock market when it is not doing well, people are selling their stocks in the expectation of reduced profits.

23. Homework Due Tuesday: My 5 Stocks
Choose 5 corporations that you think will increase in value over the next 5 weeks
TYPE a paragraph for each of the 5
In each paragraph, discuss
1) what good or service this corporation sells, 2)why you think it’ll gain in value
3)and what the stock ticker symbol is (finance.yahoo.com)
4)What market is it traded on (NYSE, NASDAQ or AMEX)?

24. Question
What are 2 ways that investors can make money from investing in stocks?

25. Making $ From The Stock Market
1)Dividends
2)Selling for more than you paid for the stock
Capital Gain - Difference between the higher selling price and the lower purchase
Capital Loss – Difference between the higher purchase price and the lower selling price

26. How would you know how well the stock market, overall, is doing?

27. How do we know which presidential candidate is leading in an election?

28. Dow Jones Industrial Average
Average of the performance of 30 large companies in various industries
An indicator of how Blue Chip stocks performed
10,000 is a psychological barrier that many investors use to see how the market is doing historically

29. Standard & Poor’s 500 (S&P 500)
Tracks the price changes of 500 different stocks
Intended to measure the overall stock market

31. What is a disadvantage to having a company’s stock be so expensive?
Question
A student was interested in stock of Berkshire Hathaway but found that one share was priced at $161,000
What is a disadvantage to having a company’s stock be so expensive?

32. Stock Split
Owners of common stock may sometimes vote on whether to initiate a stock split.
This is where each single share of stock splits into more than one share. Why?
Stock can reach such a high price that potential investors are discouraged from buying it.