19.2 stock investments Flashcards
What is an hostile takeover?
- occurs when a company attempts to buy out another company whether they like it or not
- is when a company goes out of business
- helps both companies involved
- is a meeting where IPO’s are discussed
occurs when a company attempts to buy out another company whether they like it or not
What is the OTC market in the US called?
the NASDAQ
National Association of Security Dealers Automated Quotations
An index made up of 30 large American companies. Usually what people are referring to when they ask, ‘How did the market do today?’
- s&p 500
- the Dow
- NASDAQ
the Dow
a person that buys shares of ownership in a corporation
stockholder
represents general ownership in a corporation and a right to share in its profits
common stock
What are 3 sources available to learn more about companies before purchasing their stock?
- Moody’s Handbook of Common Stocks
- Value Line
- Standard and Poor’s Encyclopedia of Stocks
Where are stocks of smaller companies traded?
the over-the-counter (OTC) market
NOT the stock exhange
broker that provides information about securities you may want to buy, work for brokerage houses with large research staffs
full service broker
What is the best known stock exchange?
the New York Stock Exchange
interested buyers tell ____ what they would be willing to pay for certain shares of stock
interested buyers tell brokers what they would be willing to pay for certain shares of stock
payments paid to stockholders if a business is profitable
dividends
The ____ value of a company can change rapidly.
the market value of a company can change rapidly
Who must a corporation pay before it can pay any dividends to stockholders?
- has to pay bondholders first the rate of interest promised to them
- sometimes there is not enough money left to pay dividends so no dividends are paid
- if a corporation goes out of business then a stockholder may get very little or nothing back from their investment
What are 4 economic conditions that affect stock prices?
- inflation
- interest rates
- consumer spending
- employment
the relationship between a stock’s selling price and its earnings per share
price-earnings (P/E) ratio
higher spending for recreation in the economy would most benefit the stock prices for companies in the ____ industry
- electronics
- health care
- office equipment
- financial services
electronics
fee that brokers charge for their services
commission
What are the 4 steps in the process for deciding stock purchases?
- 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
through ____, stockholders state the price at which they are willing to sell their shares of stocks
through brokers, stockholders state the price at which they are willing to sell their shares of stocks
What are two disadvantages of investing online?
- inexperience in investing can result in large financial loss
- many online investors sell or buy stocks too quickly since it can be done in just one click
_____ are payments of profits given to shareholders
dividends
a licensed specialist in the buying and selling of stocks and bonds
stockbroker
How do interest rates effect stock?
as the cost of money changes, company profits increase or decline
- the price at which a share of stock can be bought and sold in the stock market
- indicates the current value of a share of stock
market value
How does consumer spending effect stock?
the profits of companies that sell products and services to households are directly affected by buying habits, so if consumers buy less than profits will be less, if buy more than profits will be greater
If a business is doing well, the market value is likely to go ____
up
which of the following describes how a stock index works?
- it is where securities are bought and sold
- a computer based trading system to enhance the trading of stocks
- a benchmark average to compare how the economy and market are doing
- investment tools to ‘predict’ how the market will perform a year from now
a benchmark average to compare how the economy and market are doing
broker that just places orders and offers limited research and other services, charge lower commissions
discount broker
What are the 2 types of brokers?
full service broker
discount broker
What is the name of the organization that oversees the stock market?
- Federal Reserve
- FDIC
- Securities and Exhange Commission
Securities and Exhange Commission
‘McDonald’s Discovers Healthy Alternative to Cooking French Fries.’ This would likely cause shares of MCD to :
- decrease
- increase
- remain unchanged
increase
The ______ gives you an indication of whether the stock is priced high or low in relation to its earnings per share
the P/E ratio gives you an indication of whether the stock is priced high or low in relation to its earnings per share
What are some questions you should ask yourself if you are considering investing in a company?
- has the company been profitable over a period of years?
- have the company’s managers made good business decisions?
- does the company have growth potential in coming years?
- does the company have an unusually large amounts of debt?
- how does the company compare with others in its industry?
- what is the yield of the stock?
- what is the price of the stock?
What do online investing services offer?
- brokers provide these online services
- allow investors to access their account info and buy and sell securities
- when investing online, you are acting as your own financial planner
- transactiosn are less expensive and more convenient than using a financial planner or broker
a common stockholder is entitled to:
- receive dividends before any other stockholders
- everything the company owns and makes
- vote to elect the corporations officers
- lower taxes on dividends received
vote to elect the corporations officers
What time is the NYSE open every business day?
from 9:30am to 4:00pm
Which of these statements best describes preferred stock?
- vote at the annual meeting of the company
- first priority for receiving dividends
- low priority for receiving dividends
- no stated dividend rate
first priority for receiving dividends
Describe common stock.
- represents general ownership in a corporation and a right to share in its profits
- has no stated dividend rate
- stockholders are invited to the annual meeting of the corporation and allowed to one vote per share of common stock owned
- receive dividends only after preferred stockholders are paid their dividends
- if company profits are large then common stockholders may receive higher dividends than preferred stockholders
a network where securities transactions occur using telephones and computers rather than on an exchange
over-the-counter (OTC) market
What does the US Securities and Exhange Commission (SEC) do?
- oversee the financial markets
- requires all companies that issue publicly traded securities to electronically file detailed reports
If a business has a poor record or is doing bad, the market value usually goes ____
down
What are the 2 most commonly reported stock indexes?
- the Dow Jones Industrial Average (DJIA)
- Standard & Poor’s (S&P) 500
indicators of stock values that are commonly reported on websites, television, radio and in newspapers
stock index
Describe preferred stock.
- has priority over common stock in payment of dividends (so gets paid before common stock)
- dividends limited to a set rate
- less risky than common stock
- usually no voting rights
market value (or market price) can be described as:
- yesterday’s closing price
- today’s opening price
- the dollar value of all shares of a company’s stock
- the current value of the stock
the current value of the stock
a business organization that accommodates the buying and selling of securities
stock exchange
what is an IPO?
- the first time a company offers stock
- a company that buys its own stock
- a stock market index
- Investment Per Order
the first time a company offers stock
How does inflation effect stock?
higher prices can result in lower spending by consumers which reduce company profits
has priority over common stock in the payment of dividends
preferred stock
What are the 2 main classes of stock issued by corporations?
- preferred stock
- common stock
Today, the NASDAQ includes many ____ companies
large
