Unit 5 investing part 3 stocks
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UNIT 5: Investing Part 3: Stocks. Dollars and Sense. Review: Investments. Your need for savings will increase as your goals become more expensive. Investing at a young age can lead to better security and economic independence later in life. Investing in Stocks. Why Invest in Stocks?

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UNIT 5: Investing Part 3: Stocks

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Unit 5 investing part 3 stocks

UNIT 5: InvestingPart 3: Stocks

Dollars and Sense


Review investments

Review: Investments

Your need for savings will increase as your goals become more expensive.

Investing at a young age can lead to better security and economic independence later in life.


Investing in stocks

Investing in Stocks

  • Why Invest in Stocks?

    • Become part owner in a corporation!

    • Earn a high rate of return.

      • Rate of Return: Over the past 100 years, American Stocks have had an annual return of 9.7%

        • Over past 20 years, American Stocks have had an annual return of 13%!


Investing in stocks1

Investing in Stocks

  • Ownership of Stocks

    • Ownership in a corporation is shown in printed form, called a stock certificate.


Investing in stocks2

Investing in Stocks

  • Market Value: the price at which a share of stock can be bought and sold for in the market.

    • What affects price of stock?

      • How is the business doing? Financial reports, business releases.

      • State of Economy. (Which phase of business cycle?)

      • Political Developments


How do i make in the stock market

How Do I Make $$$ In The Stock Market?

  • 2005 = Pepsi $31.94

  • Buy Pepsi today at $73.21 Buy 100 shares. $7,321.

  • Imagine 2 years from now…(April 2015)

  • Pepsi’s stock price on April 2015 is now $101.94!!

    • You sell your 100 shares now valued at $10,194!

      • You have essentially earned $2,873! (Amount Buy – Amount Sold)


How do i lose in the stock market

How Do I Lose $$$ In The Stock Market?

  • Buy Pepsi today at $73.21. Buy 100 shares.

    $7,321.

  • Imagine 2 years from now…(April 2015)

  • Pepsi’s stock price on April 2013 is now $31.94!!

    • You sell your 100 shares now valued at $3,194!

      • You have essentially lost $4,127! (Amount Buy – Amount Sold)


Selecting stock investments

Selecting Stock Investments

  • There is no secret or special formula.

    • It requires: hard work and research.

  • Four-Step Process for Deciding on Stocks

    • Observe and Analyze Economic and Social Trends

    • Determine Industries that will be affected

    • Identify Companies in those industries

    • Decide whether to buy, sell or hold the stock of those companies.


Where are stocks sold

Where are Stocks Sold?

NYSE: New York Stock Exchange

AMEX: American Stock Exchange

Nasdaq: National Association of Securities Dealers Automated Quotations


Nyse amex nasdaq

NYSE, AMEX, Nasdaq

  • Buying Stock = “Trade” when the best bid meets the lowest offer to sell.

    • Stock prices are determined by supply and demand.


Stock exchanges

Stock Exchanges

  • Compare a Stock Exchange to Ebay…

  • Ebay and Stock Exchanges = Auction sites

    • Seller puts an item up for sale, and several people compete to buy the same item.


Going public

“Going Public”

  • Go Public: the process a company takes to offer shares of stock to the public for the first time.

    • Initial Public Offering (IPO): the first sale of a corporation’s public shares.


Why go public

Why “Go Public”

  • Businesses offer stock for many reasons, that include:

    • Raise Capital

    • Expand Operations/Create Jobs

    • Fund Research and Development of Products

    • Pay Off Debt

    • Provide Employees with Benefits

    • Develop Marketing Strategies

    • Generate Additional Revenue


Selecting stocks

Selecting Stocks

  • In selecting a specific stock to buy, you should learn something about the business record of the corporation.

  • There is no secret or special formula.

    • It requires: hard work and research.

    • The opportunity to earn a high rate of return attracts people to invest in stocks.


Selecting stocks1

Selecting Stocks

  • When considering stocks, ask the following questions:

    • Has the company been profitable over a period of years?

    • Does the company have growth potential in coming years?

    • How does the company compare with others in its industry?


Identifying important figures in selecting stock

Identifying Important Figures in Selecting Stock

  • Revenue: The dollar amount of sales during a specific period, including discounts and returned merchandise.

    • When evaluating stocks, revenue growth serves as an indication of a company's health.


Which to buy

Which to Buy

Pepsico 66.02 17.6 p/e

Coke 56.82 16.6 p/e

Who’s got a Better Investment?


Identifying important figures in selecting stock1

Identifying Important Figures in Selecting Stock

  • P/E Ratio: Market Value per Share/Earnings per Share

    • it shows how much investors are willing to pay per dollar of earnings. It shows value.

    • In general, a high P/E means high projected earnings in the future. However, the P/E ratio actually doesn't tell us a whole lot by itself. It's usually only useful to compare the P/E ratios of companies in the same industry


Identifying important figures in selecting stock2

Identifying Important Figures in Selecting Stock

52 Week Range: The highest and lowest price at which a stock was sold in the past year (52 weeks).

High Low Current

Coke 61 43 57

Pepsi 67 47 66


Identifying important figures in selecting stock3

Identifying Important Figures in Selecting Stock

  • Earnings per Share:

    • = Net Income – Dividends / Average Outstanding Shares

    • EPS indicates the profitability of a company.


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