Stocks

Public Corporation

Is a company with publicly traded shares that anyone can buy in a stock market.

Is also legally separated from the stockholders (people that own the stock) and the managers that run it

Stock holders own the company

Public Corporation

Stockholders are not responsible for the company’s debt

A corporation continues to exist even if the stockholders or managers change

Stockholders can easily sell their ownership shares through the stock market

Private Corporation

May be owned by an individual Or privately sell stocks to fund the

business Stocks are not sold publicly on the

stock market

Stocks

Initial Public Offering – IPO Initial sale of stock to the public by

investment bankersUnderwriter – Investment banker

that buys an entire new securities issue from a company and resells it

Stock Exchanges

3 Major stock markets1. NYSE – New York Stock Exchange2. NASDAQ – National Association of

Securities Dealer Automated Quotation3. AMEX- American Stock Exchange

Types of Stock

Common Stock Preferred Stock

Common Stock

Shares of the company do not guarantee a dividend (Part of the companies profit that are shared with the stockholder)

Dividend may be more then preferred stock holders

Right to vote for Board of Directors Right to vote at Annual Meeting

Preferred Stock

Guaranteed dividend No voting rights

Regulating Agency

Securities and Exchange Commission (SEC)

Stock Terms

Earnings – The amount of money that remains after subtracting the companies expenses from its revenue

Investor – Someone who risks funds with the hope of it increasing in value for the long haul

Speculator – Someone who risks funds with the hope of it increasing in value for a short period of time

Stock Catagories

Income Stocks Income Stocks pay unusually large

dividends that can be used as a means of generating income without selling the stock, but the price of the stock generally does not rise very quickly.

Stock Catagories

Blue-Chip Stocks Issued by very solid and reliable

companies with long histories of consistent growth and stability, blue-chip stocks usually pay small but regular dividends and maintain a fairly steady price throughout market ups and downs.

Stock Catagories

Growth Stocks Issued by young, entrepreneurial companies

that are experiencing a faster growth rate than their general industries, these stocks normally pay little or no dividend because the company needs all of its earnings to finance expansion. Since they are issued by companies with no proven track record, growth stocks are riskier than other types of stocks but also offer more appreciation potential.

Stock Catagories

Cyclical Stocks Cyclical stocks are issued by

companies that are affected by general economic trends. The prices of these stocks tend to go down during recessionary periods and increase during economic booms. Examples of cyclical stock companies include automobile, heavy machinery and home building

Stock Catagories

Defensive Stocks The opposite of cyclical stocks,

defensive stocks—issued by companies producing staples such as food, beverages, drugs and insurance—typically maintain their value during recessionary periods.