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Understanding Industries Part 2

Understanding Industries Part 2 Security Market Productivity Learning Objectives Define what a stock is, how to read stock quotations Explain how an investor makes a return on stocks. Explain how stocks are traded. Find and interpret a stock quote using a financial website

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Understanding Industries Part 2

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  1. Understanding IndustriesPart 2 Security Market Productivity

  2. Learning Objectives • Define what a stock is, how to read stock quotations • Explain how an investor makes a return on stocks. • Explain how stocks are traded. • Find and interpret a stock quote using a financial website • Explain the role of the Securities and Exchange Commission in financial markets • Use a stock index to measure stock performance. • Differentiate between the Dow Jones Industrial Average, the Standard and Poor’s 500, and the NASDAQ Composite.

  3. What Is Stock? • Stock: • Issued by corporation to raise financial capital. • Buyer of a share of stock acquires ownership rights in corporation, publicly owned

  4. Corporation Legal entity that is owned by stockholders who have limited liability in debts of the corporation. Why do corporate firms issue stock? • Pay for buildings, systems, or other things that will help grow the earnings of the company. • So they don’t have to borrow.

  5. Why Companies Issue Stock

  6. How Do You Make Money With Stocks? Dividend Yield Capital Gain

  7. Classification • Industry • Size (Market Cap) • Growth or Income (Capital Gain or Dividend)

  8. True or False?“If you own common shares in a company” • Choose the colors for the company logo • Vote for the board of directors • Are not allowed to look at the financial statements for the company. These are private and not disclosed to anyone outside. • Are entitled to any extra cash the company has. • Can sell your stock anytime you want.

  9. IPOs: Initial Public Offerings • More IPOs in up markets. • Overall do good the first year and then it’s anyone’s guess. • Only about 20% of the company is offered the first time around. • Many risks. IPOs The first sale of stock by a private company to the public.

  10. Securities and Exchange Commission (SEC) • Ensures financials are “real” or disclosure • That people who know more don’t benefit at the expense of small investors • That brokers and firms don’t engage in shenanigans • Funds behave properly as well

  11. Organized Security Exchanges • Organization that provides facilities for its members to buy and sell listed securities. • Stocks and bonds that have been approved for trading on a security exchange are called listed securities. • New York Stock Exchange (NYSE) • largest of U.S. exchanges • American Stock Exchange (AMEX) • National Association of Securities Dealers Automated Quotation (NASDAQ)

  12. Stock Exchanges

  13. New York Stock Exchange (NYSE)

  14. National Association of Securities Dealers Automated Quote System: NASDAQ

  15. American Stock Exchange (AMEX)

  16. Indexes & Averages: Frequently serve as barometers of overall confidence of business conditions.

  17. Dow Jones Industrial Average (DJIA) Oldest and most well-known stock index. Covers 30 very large companies. Price-weighted index so the stock with the highest price (IBM) has the most influence. A composite of the stock values of 30 large industrial firms. The most widely recognized indicator. 30 large and actively traded industrial stocks.

  18. Standard and Poor’s 500 - Large Cap 500 largest stocks Market value-weighted index. GE, Exxon Mobil, Microsoft, Citigroup, and Pfizer are the largest companies Used as an index for large companies A broader measure of the market than the DJIA. Uses more stocks (400 industrials, 2 transportation, 40 utilities, 40 financial) and yields different results.

  19. NASDAQ composite • Launched in 1971, the NASDAQ Composite Index is a broad based Index. Today, the Index includes over 3,000 securities, more than most other stock market indices.

  20. WWD Stock Index A composite of textile/apparel industry stocks.

  21. Daily stock quotations Rising: bull-market (public confidence) Falling: bear-market (lack of confidence) Points: The advances and declines of the Dow are given in points. • suppose industrial avg. at close of trading on one day is 879.32 and on the following day the avg. goes up to 882.56. Avg. has then risen 3.24 points.

  22. Finding the stock quote • Using finance.yahoo.com, find the stock quote: • Coca Cola  KO: NYSE • Industry: Textile – Apparel Clothing http://biz.yahoo.com/ic/320.html

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