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The Investment Challenge

The Investment Challenge. Presented By SOLENT SKILL QUEST. WARNING!. DON’T TRY THIS AT HOME. WHY NOT!. Jerome Kerviel January 2008 Société Générale £3.7Bn. NICK LEESON 1995 Barings Bank $1.3Bn. How the Stock Market Works. The Stock Market. Daily News Statements

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The Investment Challenge

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  1. The Investment Challenge Presented By SOLENT SKILL QUEST

  2. WARNING! DON’T TRY THIS AT HOME

  3. WHY NOT! Jerome Kerviel January 2008 Société Générale £3.7Bn NICK LEESON 1995 Barings Bank $1.3Bn

  4. How the Stock Market Works

  5. The Stock Market • Daily News Statements • Record Highs & Lows • Gains & Losses • Opening & Closing Indices

  6. The Questions! • What is Stock? • What is the Stock Market? • Why do we need a Stock Market? • Where does the Stock come from? • Why do people want to Buy and Sell from it?

  7. Determining Value Example A Restaurant • Purchases • Building • Kitchen Equipment • Tables • Chairs • Staff • Supplies • Marketing • Cost £500,000

  8. Finances

  9. 2nd YEAR Finances

  10. Sell the Company? What is it worth? No Further Trading • Building and Equipment = £500,000 • Assets or Book Value Sell - Ongoing Business (Keeps trading) • £750,000 = 10% return (75,000 per year Profit) • £1.5M = 5% return (75,000 per year profit)

  11. Selling the Business Value of Business = £1.5M • Selling 10 Parts = £150,000 per share • Each Share entitled to 1/10 of profits Alternatives • Sell 1500 Parts = £1000 per share • Divide into 3000 Shares – sell 1500 & keep 1500 (remain in control & bank £750,000)

  12. Stock • Ownership of Company Assets & Profits • A Dividend = A share’s proportion of the Company’s profits If Restaurant: • 10 owners • makes £75,000 profit • then each share = £7,500

  13. The Stock Exchange • Selling the Restaurant • To local Community • Word of mouth • Advertise in Local Paper • To wider community – DIFFICULT! • Stock Market (sometimes call Stock exchange) solves problem • The LSE (London Stock Exchange) – The Supermarket for buying and selling shares • The LSE – Better known as FTSE (The Footsie) • Use of Stock Brokers

  14. The Stock Exchange Interesting Facts • All buying & Selling in ONE Place – Share price known every second of the Day • Price fluctuates based on: • Company NewsMedia NewsEconomic News • Price of Stock reflects: • Projected dividend • Profits • Price of Commodities (Oil, Gas, Etc)

  15. The FTSE Indices • FTSE 100 • 100 largest quoted companies (usually over 2 billion in value) • Companies on index are changed quarterly • FTSE 250 • The 250 largest companies after FTSE 100 • Tracker Funds cant invest in these companies • FTSE Small Cap • About 550 Smaller Companies • FTSE All Share • About 900 Companies • Price calculated at end of each day

  16. Remember The Questions! • What is Stock? • What is the Stock Market? • Why do we need a Stock Market? • Where does the Stock come from? • Why do people want to Buy and Sell from it?

  17. Why Invest in Shares Share Price – Fluctuations FTSE 100 – 18% Dividend (7 %) Interest Rate (5.25 %)

  18. Cash ISA (TAX FREE!) Capital Savings Bond (Guaranteed Return) INVESTMENT OPTIONS

  19. Managing your Investment • Yahoo Finance • FT.Com • Bloomberg.Com • www.londonstockexchange.com

  20. Share Price – The Influencing Factors • The Economy • Company News • Analyst Reports • Press Recommendation • Sentiment • Technology

  21. The Newspaper

  22. Task – Understanding Information From the Daily Papers find the following information: • Identify Newspaper & Date • Identify FTSE 100 Price • Find Price of: • Prudential • Barclays • Sainsbury • Next • Mark & Spencer

  23. Terminology • Shares/Equities • Acquisition • Merger • Profit/Loss • Cash Flow • Assets

  24. THE INVESTMENT CHALLENGE

  25. The Investment Challenge Rules of the Game • Each Team Has £100,000 to invest • One days trading will last 20 mins • Day starts at 08:30am and closes at 4:30pm • You can buy and sell at anytime • No Commission Charges • News Items will occur by Text and Radio • Winner = Highest Value (Closing Cash & Share Value) • Bell will signify start and end of trading

  26. The Investment Challenge • To complete a Trade • Complete a Transaction Document • Pass to Stock Broker • Obtain Price • Receive or Return a Certificate • Complete your Cash Flow Document PLEASE NOTE: Only 10 Transactions per Team allowed Mark your Transaction Document 1-10 in top right hand corner Use Transaction Documents in correct sequence

  27. TRANSACTION DOCUMENT Sequence Number Buy or Sell Which Company? How many are you buying or selling The Total Price of Trade = Share Quantity x Price Stock broker will provide a Buy or Sell Price

  28. CASH FLOW STATEMENT

  29. The Investment Challenge Prepare your Strategy

  30. The Investment Challenge The Game Begins

  31. The Investment Challenge Thank You On behalf of Solent Skill Quest

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