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Economics & Economic Decision Making. The Stock Market Warm Up: Open your notebook and answer: what is an investment?. ASSETS : items of value. LIQUID ASSETS (can be CHANGED for CASH quickly) Bank Accounts Bonds Stocks. NON-LIQUID ASSETS (must find a WILLING BUYER ) Antiques

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Economics economic decision making

Economics & Economic Decision Making

The Stock Market

Warm Up: Open your notebook and answer: what is an investment?

Assets items of value
ASSETS: items of value


(can be CHANGED for CASH quickly)

Bank Accounts




(must find a WILLING BUYER)




One company s story
One Company’s Story

McDonalds started as a partnership, turned into a sole proprietorship and then eventually became the Multinational Corporation it is today:


Going public
Going Public

  • The Third way for a company to grow and expand is by going public and selling of stocks (shares of the company). The money from this initial sale goes directly back to the company so it can be reinvested in the company.

  • The private company must apply & file with the SEC.

What are the other ways to grow a company?

Why would an entrepreneur sell off shares of its company?

First steps
First Steps

  • Sending a Prospectus:

    • a legal document that businesses use to describe the stocks they are offering buyers

    • commonly provides investors with information about the company's business: financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties and any other material information.

IYOW: what is a prospectus?


  • The Securities & Exchanges Commission is a government agency that regulates public companies and the people who invest in them.

  • The SEC will review the prospectus and then decide how many shares the company is worth along with how much the initial price will be.

Write out the name of the SEC. What president do you think created this business regulating agency? Why?

Second step
Second Step:

  • Offering an IPO to investors:

    • An Initial Public Offering is the first sale of stock from a private company going to a public company.

    • The initial purchase money goes directly back to the business for expansion.

What will the entrepreneur do with this money?

Now that it is a public company what can’t the entrepreneur do?

What happens to the prices after
What happens to the prices after?

  • Once a share is initial purchased, the market then decides how much that share is worth. People trade with each other and set their own prices.

  • For example, Google IPO’d at $100 per share in August 2004; the creators Larry Page & Sergey Brin sold off only 9% initially. It is now selling at

Who sets the new prices for stocks? How do they come up with it?


  • Why would Page and Brin only sell off 9%?

  • Why are they listed in the top 20 richest men in America?

  • What could Google do if it needs more money for expansion?